Senate Hearing, 108TH Congress - U.s.-Eu Cooperation On Regulatory Affairs

S. HRG.
108330
U.S.EU COOPERATION ON REGULATORY AFFAIRS
HEARING
BEFORE THE
SUBCOMMITTEE ON EUROPEAN AFFAIRS

OF THE
COMMITTEE ON FOREIGN RELATIONS

UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
OCTOBER 16, 2003
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COMMITTEE ON FOREIGN RELATIONS
RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska JOSEPH R. BIDEN, JR., Delaware
LINCOLN CHAFEE, Rhode Island PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee BILL NELSON, Florida
NORM COLEMAN, Minnesota JOHN D. ROCKEFELLER IV, West Virginia
JOHN E. SUNUNU, New Hampshire JON S. CORZINE, New Jersey
KENNETH A. MYERS, JR., Staff Director

ANTONY J. BLINKEN, Democratic Staff Director
SUBCOMMITTEE ON EUROPEAN AFFAIRS

GEORGE ALLEN, Virginia, Chairman
GEORGE V. VOINOVICH, Ohio JOSEPH R. BIDEN, JR., Delaware
CHUCK HAGEL, Nebraska PAUL S. SARBANES, Maryland
JOHN E. SUNUNU, New Hampshire CHRISTOPHER J. DODD, Connecticut
LINCOLN CHAFEE, Rhode Island JOHN F. KERRY, Massachusetts
(II)
CONTENTS
Page
Allen, Hon. George, U.S. Senator from Virginia ................................................... 1
Depayre, Ge rard, Deputy Head of Delegation, European Commission to the
United States, Washington, D.C. ........................................................................ 20
Eizenstat, Hon. Stuart, Co-Chair, European-American Business Council,
Washington, D.C. ................................................................................................. 23
Prepared statement .......................................................................................... 28
Farmer, Thomas L., General Counsel, American Bankers Association, Wash-
ington, D.C. ........................................................................................................... 39
Litman, Gary, Vice President Europe and Eurasia, U.S. Chamber of Com-
merce, Washington, D.C. ..................................................................................... 32
Ries, Charles, Principal Deputy Assistant Secretary, Bureau of European
and Eurasian Affairs, U.S. Department of State .............................................. 3
Stewart, Eric, Deputy Assistant Secretary for Europe, U.S. Department of
Commerce ............................................................................................................. 11
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Statement Submitted for the Record by the American Chamber of Commerce

to the European Union (AMCHAM EU) ............................................................ 49
Statement Submitted for the Record by the Chamber of Commerce of the
United States of America .................................................................................... 51
Statement Submitted for the Record by the National Electrical Manufacturers
Association ............................................................................................................ 54
Statement Submitted for the Record by 3M Corporation ..................................... 55
(III)
U.S.EU COOPERATION
ON REGULATORY AFFAIRS
THURSDAY, OCTOBER 16, 2003
U.S. SENATE,
COMMITTEE ON FOREIGN RELATIONS,
SUBCOMMITTEE ON EUROPEAN AFFAIRS,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:28 p.m., in room
SD419, Dirksen Senate Office Building, Hon. George Allen, pre-
siding.
Present: Senator Allen.
OPENING STATEMENT OF HON. GEORGE ALLEN,
U.S. SENATOR FROM VIRGINIA
Senator ALLEN. I call this hearing of the Subcommittee on Euro-
pean Affairs to order. I want to thank all of our witnesses for ap-
pearing before the committee this afternoon.
We are here today, ladies and gentlemen, to explore the impor-
tance of cooperation between the United States and the European
Union on regulatory affairs, and the impact that this has and will
continue to have on transatlantic trade and investment.
The flow of transatlantic trade and investments between the
United States and the European Union is the largest clearly in the
world, amounting to approximately $1 billion every day. The Euro-
pean Union and the United States together account for about 37
percent of the value of global trade in goods. When you look at
global trade in services, 45 percent of the global trade in services
are between the European Union and the United States. Now, this
is unique not only because of its size and complexity but because
its a relationship that truly benefits both sides immensely. There
are tens of thousands or American and European citizens that go
to work every day to businesses which are a result of our bilateral
trade and this investment relationship.
Having served as Governor of Virginia going on trade missions,
I am well aware of the tremendous numbers of jobs in just the
Commonwealth of Virginia that are from companies from Great
Britain, Germany, France, Italy, Denmark, Sweden, The Nether-
lands, Austria and other European countries, and I know the num-
ber of American businesses that go over to Europe and have a pres-
ence in those various countries as well.
The key element in making sure that this relationship stays posi-
tive and hopefully growing is regulatory cooperation, making an ef-
fort to work with or consult with each other prior to new regula-
tions becoming effective or going into law. Both the United States
(1)
2
and the European economies are very dynamic, they are fast mov-
ing, and changes that are enacted in either regulatory regime or
system without prior participation and consultation could result in
lost commerce and jobs.
Though the markets are more intertwined than ever before, we
nonetheless have disputes. I need not hammer on each and every
one of them, but they are from within the areas from everything
in agriculture, genetically modified foods to how we raise our cattle
to a variety of other issues. All of this makes it important that we
do consult with one another.
I do think a positive step was taken in June of this year at the
U.S.EU summit where the United States and Europe agreed to
start to increase cooperation on new regulatory issues and look for
ways to coordinate rulemaking between the U.S. and the EU agen-
cies. Not all of our government agencies have bilateral mechanisms
for consultation on these regulatory issues, but there are numerous
bilateral private sector groups promoting cooperation, and while
our agencies, the government agencies, are working to coordinate
regulatory policymaking, it has been my view that in some cases
the corporate sector on both sides has led the way.
Take for example the automobile industry. Both United States
and European auto makers have been successful in selling their ve-
hicles around the world and in each others markets, because they
consider regulatory consultation a necessity for their own survival,
their market share and for their growth. For the auto industry,
international regulatory consultation is not an afterthought, it is a
priority, and now that we are seeing the European Union grow
from 15 to 25 countries, this cooperation is going to be more impor-
tant than ever.
There is no question this is going to open up new opportunities
for people in central Europe, what some would call eastern Europe.
For the central European countries its just going to be greater op-
portunity for us to have our goods and services there as well as
theirs getting into our market, or will it constrict it. So the co-
operation with the current 15 is important, but in fact its even
going to be more important in the future, if history is any lesson.
Now, there are certain regulatory policies that seem to evade
consensus, and continue to cost both valuable man-hours and rev-
enue to companies in both the United States and Europe.
Probably one of the most recognized and discussed are the envi-
ronmental standards the United States and the United Nations
have signed for products going to market. While its important to
note that the directive has yet to be formally released, many U.S.
and European chemical industries have expressed grave concern
with the proposed EU chemical directive. And there are U.S. com-
panies who do business there, and I will not mention the compa-
nies so they get dragged into it, but there is the strong presence
of a German company in the Commonwealth of Virginia who is in-
volved in the chemical business, and they see the concerns.
So its not just one side or the other of the Atlantic, it has an
impact on both sides. And depending on the final version, this di-
rective could have a massive adverse ramification both leading to
the loss of jobs and revenue.
3
I have other things I will put in the record, but the point is, we
have had impressive cooperation in recent years, but, its very obvi-
ous, I like to be positive and optimistic, but lets be also forthright
and realize we have some challenges as we go forward to stream-
line trade and investment regulations and opportunities across the
Atlantic.
As the European Union countries and that Union grows, they are
going to play an even more prominent role in these issues. I strong-
ly advise our government officials to be involved. Thats one of the
reasons I wanted to have this hearing. And I certainly wanted to
say to our friends, truly, our friends and allies, people who share
our love of freedom and great enterprise to recognize that it is ben-
eficial for the people of both the United States and the European
Union to have the opportunities of prosperity, to goods and serv-
ices, and to a better quality of life that comes from cooperation and
working together.
With that, I want to thank all our witnesses for being here, and
I will introduce the first panel and each panel as the individuals
come forth.
The subcommittee has invited representatives from U.S. Govern-
ment agencies and private sector representatives to discuss their
perspectives on U.S.EU regulatory cooperation and to offer their
insights and suggestions for methods of increasing cooperation in
the future so that we can have more investment, more trade, and
the bottom line is more jobs for people in both the EU and the U.S.
On the first panel, from the United States Department of Com-
merce, were pleased to have Deputy Secretary for Europe, Eric
Stewart with us. Thank you for being with us. The Department of
Commerce is on the front line in helping to promote direct trade
flows between Europe and America, and will provide unique in-
sights on how regulatory cooperation might facilitate trade in a
number of markets.
Charles Ries is the Principal Deputy Assistant Secretary for Eu-
ropean and Eurasian Affairs. He can give us a historical perspec-
tive on the past U.S.EU efforts toward cooperation, providing ex-
amples of recent successful collaborations. The resolution of the
dispute concerning the import of Spanish clementines into the U.S.
market might provide insight into how similar disputes might be
approached in the future.
With that, I will also put a personal note. The rest of the family
likes those Spanish clementines. I prefer navel oranges from Cali-
fornia or Florida, and Ruby Red grapefruits from Texas, but in my
family, children like those clementines, so they were happy by your
good work, on a personal note.
Mr. Ries, we will hear from you first.
STATEMENT OF CHARLES RIES, PRINCIPAL DEPUTY ASSIST-

ANT SECRETARY, BUREAU OF EUROPEAN AND EURASIAN
AFFAIRS, U.S. DEPARTMENT OF STATE
Mr. RIES. Thank you, Mr. Chairman. I welcome this opportunity
to appear before you today to describe the trends in regulatory co-
operation between the U.S. and the European Union, and we ap-
preciate very much your interest in this important topic.
4
Mr. Chairman, Im pleased to report that the U.S. Government

and the EU are making real progress in making our regulatory ap-
proaches more compatible. This progress should especially encour-
age us when we consider the challenges.
Discussions in the regulatory field often involve multiple agen-
cies on both sides of the Atlantic, each with their own responsibil-
ities and mandates. To complicate matters further, the U.S. and
EU approach the drafting and implementation of regulations in dif-
ferent ways, reflecting our dissimilar government structures and
administrative traditions.
Aware of these philosophical and structural differences, the U.S.
and EU leaders have established a number of mechanisms for ad-
dressing regulatory issues. The new Transatlantic Agenda of 1995
established a framework of regular contact and a commitment to
common action. It recognized that regulatory issues in particular
need to be dealt with early. The new Transatlantic Agenda also
recognized the importance of industry and nongovernmental orga-
nization involvement.
The 1998 Transatlantic Economic Partnership resulted in guide-
lines on regulatory cooperation and transparency that further en-
couraged both sides to exchange expertise, information and ideas.
Most recently, as you mentioned, U.S. and EU leaders agreed upon
a positive economic agenda at the last summit, comprising regu-
latory cooperation projects in five areas and an informal dialog on
financial markets.
In line with these policy declarations, U.S. and EU regulators
have launched a number of informal and innovative initiatives.
Just last month, for example, the FDA and its European counter-
part, the European Agency for the Evaluation of Medicinal Prod-
ucts, agreed to share nonpublic information in the area of pharma-
ceuticals. Our National Highway Traffic Safety Administration and
its European counterpart recently agreed to a similar information
exchange arrangement.
Regulators reached these arrangements without creating any
kind of new international legal obligations. But while these ar-
rangements are informal in nature, they help ensure that regu-
lators operate from the same facts and are likely to foster common
regulatory approaches.
Mr. Chairman, let me focus this afternoon on just two current
issues in the U.S. regulatory arena, given our shortness of time,
the food safety provisions of the U.S. Bioterrorism Act and the EU
so-called REACH chemical directive that you mentioned in your
opening comment.
The European Union, along with our other key trading partners,
has had a key interest in the establishment of the new FDA food
safety requirements designed to reduce the risk of bioterrorism.
Twice during the public comment period, the European Commis-
sion submitted extensive comments on behalf of the EU regarding
potential effects of the proposed new regulations. We welcomed this
input. As published last week, the FDAs interim final regulations
were modified to make them less burdensome on trade, in part in
response to the comments received from the EU and our other
trading partners. In this case, U.S.EU cooperation resulted in a
better outcome for both sides.
5
For its part, the European Commission presently is considering

new legislation that would impose extensive testing and approval
requirements on tens of thousands of chemicals produced in or
traded with the EU. The U.S. was one of many interested parties
that viewed the so-called new REACH chemicals regulation pack-
age as overly costly, bureaucratic and burdensome, and ultimately
unworkable, as you mentioned.
In response to the concerns expressed by many, including us,
over the lack of transparency during the policy development phase,
the Commission recently posted the draft chemicals regulation on
the Internet and accepted public comment for an 8-week period.
More than 6,400 organizations and individuals submitted com-
ments.
As a result, we understand the Commission is preparing a more
limited proposal that we hope will reflect the concerns we and oth-
ers expressed. We hope that this public comment process is the be-
ginning of a trend. We would like to see this greater spirit of trans-
parency and inclusiveness structurally built in to the EU regu-
latory framework so that each new regulation also benefits from
meaningful stakeholder input.
As we work more and more with the EU on regulatory issues
such as these, we discover ways in which we could promote regu-
latory cooperation and minimize regulatory-based trade disturb-
ances. Let me suggest a few elements of our strategy.
First, we believe in patient engagement and sustained public di-
plomacy. We work best when we engage the EU on multiple levels.
In this spirit, our embassies economic, commercial and public di-
plomacy officers work hard to explain our point of view to all inter-
ested parties in the EU and in Europe as a whole. Frequent work-
ing-level discussions between U.S. and EU regulators play an im-
portant part.
Second, we have discovered that multilateral approaches some-
times can be used to resolve regulatory issues. For example, OECD
regulatory reform reviews and WTO committee meetings provide
the U.S. with additional fora in which to work with the EU and
other interested parties on regulatory issues. The International
Civil Aviation Organization (ICAO) played a similar role a couple
of years ago in finding a way to resolve our concerns about the
EUs hush kit regulations.
Third, public-private coordination enhances our chances of suc-
cess. The support of business, consumer and environmental groups
benefits us in government tremendously. Our transatlantic busi-
ness and consumer dialogues play an important role in this as well.
The final key to our success rests on the principle of timely inter-
vention. When we act proactively rather than reactively we have a
much better chance of ending up with a positive outcome.
Our action plan, therefore, includes the following: We are con-
tinuing to press the EU for more meaningful transparency and
stakeholder access. We are promoting informal information ex-
changes and dialogs. We are encouraging interested parties on both
sides of the Atlantic to meet regularly just to discuss the hot
issues. And finally, we are enhancing interagency cooperation
among U.S. Government agencies that work on U.S. regulatory
issues.
6
A colleague of mine likes to say about the transatlantic partner-

ship, what defines us makes headlines; what unites us makes
progress. The U.S. and the EU dont receive enough credit for our
collaborative effort at regulatory cooperation.
We both recognize that if we reach agreement on these important
issues, everyone wins. If we dont, everyone loses.
A more prosperous world community, therefore, hinges on the
continued success of our partnership.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Ries follows:]
PREPARED STATEMENT OF CHARLES P. RIES

Thank you, Mr. Chairman. I welcome this opportunity to discuss with the sub-
committee cooperation between the U.S. and the EU on regulatory affairs. Im sure
we all appreciate the relevance and impact of this issue on the competitiveness of
our businesses that operate globally, and on the safety of the products that we use
here at home. We at the State Department appreciate your attention to this ever-
pressing issue.
We in the U.S. government, along with our colleagues in the EU, have made great
progress in reconciling our regulatory approaches. We too often overlook the
progress that weve made when we focus our attention on the issues that still divide
us. Certainly, we must be realistic in our appraisal of the transatlantic regulatory
environment, and we must press the EU for more openness, flexibility, and progress
on the issues of contention between us. However, we should also appreciate how
much our common resolve has achieved.
Our continuing progress on regulatory convergence promises significant benefits
not only to the U.S. and EU economies, but to the world economy as well. We know
that more closely aligned regulatory systems benefit both of our economies, by facili-
tating trade and ensuring robust protection of health, environment, and safety. In
addition, however, since U.S.EU regulatory cooperation sets the standard for the
rest of the world, the more regulatory convergence we achieve, the more we facili-
tate trade among all nations. Clearly, this issue affects trade on a much larger scale
than many would believe.
THE CHALLENGE OF COOPERATION
All this having been said, the U.S. and the EU follow different regulatory ap-
proaches, and we must also acknowledge how plainly difficult and elusive regulatory
convergence can be. Negotiations between the U.S. and the EU often involve mul-
tiple agencies on both sides, each with their own responsibilities and mandates. To
complicate matters further, the U.S. and the EU approach the drafting and imple-
mentation of regulation in differing ways, reflecting our different governmental
structures and administrative traditions.
The EU generally relies on a more prescriptive approach to regulation, by which
its regulators inform industry exactly how it can conform to rules. Additionally, EU
regulators often base regulations on their controversial precautionary principle, an
approach we believe can improperly overlook relevant scientific evidence and can
take risk-avoidance efforts to an extreme.
We in the U.S. depend on a more outcome-driven approach, by which our regu-
lators specify certain performance requirements while granting industry consider-
able latitude in how to achieve them. As much as possible, our decisions are
science-based and are the products of sound risk analysis.
In addition, U.S. and EU regulations must pass through different review proc-
esses. The EU more frequently requires endorsement at the political level by min-
isters for regulatory decisions, while we rely on independent regulators and regu-
latory agencies removed from the political process. Our system, based on public no-
tice and comment, provides a transparent process open to stakeholder participation.
We obviously believe that our regulatory approach works better in the long run
because it tends to product more flexible outcomes based on more appropriate risk
management analyses. These outcomes, in turn, are better able to adjust and adapt
to changing technologies and levels of knowledge. Our different frameworks for
drafting, approving, and implementing regulation, can create structural obstacles in
our efforts to promote regulatory cooperation. On occasion, it can also lead to trade
friction and differing approaches in multilateral negotiations.
7
THE HISTORICAL BASIS FOR COOPERATION
In the context of these differences in approach and structure, U.S. and EU leaders
have established a number of mechanisms for addressing regulatory issues. The
New Transatlantic Agenda of 1995 established a procedure for governments and in-
dustry to deal with regulatory issues before they became hot-button issues. Among
its many achievements, the NTA set up several dialogues between constituencies on
both sides of the Atlantic. Two of these, the Transatlantic Consumer Dialogue
(TACD) and the Transatlantic Business Dialogue (TABD), have actively proposed
areas for regulatory cooperation. These Dialogues can help develop a common rec-
ommendation by their constituents and then press both the Commission and U.S.
authorities to take those recommendations on board.
The U.S. and the EU have launched a number of initiatives related to regulatory
cooperation. For example, we have reached a number of Mutual Recognition Agree-
ments, or MRAs, under which U.S. exporters of designated products can conduct
testing in the U.S. according to EU requirements, and the reciprocal being true for
EU exporters. The 1998 Transatlantic Economic Partnership (TEP) produced
Guidelines on Regulatory Cooperation and Transparency, which further encour-
aged both sides to exchange expertise, information, and ideas on alternative ap-
proaches to regulation. Most recently, at the 2002 U.S.EU summit, U.S. and EU
leaders introduced the Positive Economic Agenda (PEA), which launched regulatory
cooperation projects in five areas (cosmetics, auto safety, nutritional labeling, food
additives, and metrology) and endorsed an informal dialogue on financial markets,
led by Treasury with the participation of U.S. financial regulators, which builds on
long-standing channels of cooperation and communication. Pursuing these arrange-
ments has contributed to a formal, regulatory structure for us to identify and ad-
dress potential regulatory challenges at an early stage.
INNOVATIVE, INFORMAL APPROACHES
Out of these formal approaches, U.S. and EU regulators have launched a number
of informal initiatives to strengthen transatlantic cooperation. We see these infor-
mal arrangements as promising examples of innovation in the spirit of the trans-
atlantic partnership.
Just last month, for instance, the FDA and the EMEA, the European Agency for
the Evaluation of Medicinal Products, agreed to share non-public (business confiden-
tial) information in the area of pharmaceuticals. In this enhanced spirit of partner-
ship, both sides will share documentation on proposed regulations, position papers,
and safety and test results. The potential benefit to consumers, producers, and regu-
lators is significant.
In another example of transatlantic cooperation, our National Highway Traffic
Safety Administration (NHTSA) and Europes Directorate General for Enterprise
have reached a cooperative arrangement in the field of motor vehicle safety. This
June, the two agencies agreed to hold annual meetings, share and discuss R&D
plans, conduct joint analyses, and exchange other forms of information. This ar-
rangement, like the one on pharmaceutical information exchange, rests on the sim-
ple principle that more information leads to better regulation.
While both of these arrangements were created in the spirit of the NTA and the
TEP Guidelines on Regulatory Cooperation and Transparency, neither emerged di-
rectly from, nor resulted in, a new binding agreement. In fact, regulators on both
sides reached these arrangements without creating any kind of international legal
obligations on the part of the U.S., the European Commission, or the European
Community. 1 While these arrangements are therefore informal in nature, they en-
hance regulatory cooperation between the parties involved to an unprecedented de-
gree. As U.S. and EU officials exchange information, ideas, and opinions, they build
trust and confidence, and, as a result, make more informed and coordinated deci-
sions. In promoting trust, transparency, and more informed regulation, these ar-
rangements demonstrate the effectiveness and desirability of working-level discus-
sions between the U.S. and the EU.
We can also avert regulatory problems before they occur when we consult coopera-
tively in areas in which the EU is currently expanding and building its regulatory
scope. An example of this can be seen in the creation of the new EU aviation safety
agency, EASA (European Aviation Safety Agency). The FAA worked closely with its
EU counterparts as the proposal for EASA made its way through the European leg-
1 Exchange of letters between the United States of American and the European Commission
relating to regulatory co-operation in the field of motor vehicle safety, from Paul Weissenberg,
Director of DG Enterprise F, to Mr. Jeffrey W. Runge , MD, Administrator of the National High-
way Traffic Safety Administration, June 13 2003.
8
islative process. FAA officials continue to work closely with the Commission to pro-
vide a smooth transition from bilateral agreements with member states to a com-
prehensive U.S. agreement with the EU as a whole for those areas now under EASA
oversight, which will ensure uninterrupted transatlantic safety oversight of air-re-
lated products and services.
We encourage U.S. and EU regulators to seek cooperative arrangements along in-
formal lines on other issues. All of these informal arrangements received a signifi-
cant boost thanks to a recent opinion by the Advocate General of the European
Court of Justice defending the constitutionality of TEP guidelines and effectively en-
couraging the United States and the European Commission to consult each other
on proposed EU regulations before they receive the European Councils formal ap-
proval.
RECENT AND CURRENT MAJOR ISSUES
I will now turn my discussion to recent and current major issues in the U.S.
EU regulatory arena. I will discuss the evolution of the U.S. ban on the import of
Spanish clementines, the EUs e-commerce VAT tax, our recent bio-terror food safe-
ty initiative, and the proposed EU Chemicals Directive known as REACH. I chose
these four examples not only because of their recent prominence, but also because
they show how consensus can be reached over even the most contentious of issues.
Spanish Clementines
The dispute arose when the U.S. banned imports of Spanish clementines due to
phytosanitary concerns. Domestic citrus growers applauded the decision, citing wor-
ries about the possible spread of the Mediterranean fruit fly to the U.S. through
contaminated shipments of clementines. On the other hand, the Spanish govern-
ment protested on behalf of the Spanish growers who lost all access to our market.
Fortunately, we were able to reach a solution. By October of 2002, we were able
to agree with Spain on a new inspection and quarantine regime to decrease the like-
lihood of contaminated shipments of clementines from reaching U.S. soil and accord-
ingly we were able to lift most of the earlier import restrictions. We at State helped
resolve the issue by working closely with all parties involved: the USDA, the lead
regulatory agency on the issue; the OMB, the rule making body; the Spanish Gov-
ernment; the European Commission; and domestic U.S. citrus growers.
E-Commerce VAT/Internet Taxation
On July 1st of this year, the EU began requiring non-EU companies to collect
VAT taxes on digitally downloadable retail products sold over the Internet to Euro-
pean customers. The new EU directive raises potential national treatment concerns
on our end, since it could require U.S. companies to collect VAT taxes at differing
rates than their EU-based competitors in some cases. It could also impose compara-
tively higher administrative costs on U.S. businesses. We also felt that the EU
passed the new rules prematurely and differing implementation at member state
level created uncertainty and confusion for U.S. businesses. Unfortunately, to date
the EU has not been able to re-open the difficult internal compromise that produced
this VAT tax regime. However, some large firms, including AOL, have successfully
adapted to the new tax by strategic relocations of their European headquarters. It
is more uncertain how the tax will impact small U.S. enterprises.
Bioterrorism/Food Safety Regulations
Food safety is a top priority of the U.S. government, and the events of September
11, 2001, highlighted the need to enhance the security of the U.S. food supply. Just
last week, the Food and Drug Administration announced interim final regulations
for two provisions of the Bioterrorism Act.
The European Union, along with other key trading partners, has had a keen in-
terest in the development of these bioterrorism regulations. Twice during the public
comment period, the EC submitted extensive comments regarding the potential ef-
fects of our proposed regulations on US-EU trade. We welcomed this input.
As published, the interim final regulations have been significantly modified to
make them less burdensome on trade, in part in response to comments received
from the EU and our other trading partners.
We are pleased with this example of constructive cooperation in the development
of our regulations, and are hopeful we will be able to contribute in a similar vein
to the development of EC regulations that have an effect on our trade relationship.
Chemicals Directive (REACH)
Ill now move on to discuss a current hot-button issue: the proposed REACH
chemical directive that would overhaul EU chemical regulations. Im going to dwell
9
on this topic a little longer than the others because although we feel that much
progress still remains to be made, we are encouraged by the Commissions recent
openness on this issue.
Earlier this year, the Commission unveiled its first draft proposal that, to put it
plainly, was riddled with problems. First of all, it was grounded on their problem-
atic precautionary principle instead of science-based risk assessment. As such, it
effectively shifted the burden of proof for industry to unworkable levels. Just as im-
portantly, it would have required testing all new and existing chemicals, even those
that have been in everyday use for decades, and it would have imposed these testing
requirements even on downstream users of chemicals. We were one of many inter-
ested parties that viewed the new regulations package as overly costly, burdensome,
and bureaucraticand ultimately unworkable. REACH has been controversial on
both sides of the Atlantic, as the EU chemicals industry and the leaders of the UK,
France, and Germany have cited similar concerns with the package.
In response to criticism over the lack of transparency in development of the policy,
the Commission broke new ground by posting the draft chemicals regulation on the
Internet and accepting public comment for an eight-week period this summer. This
move marked the Commissions first use of a public comment period for proposed
regulation. When all was said and done, more than 6,400 organizations and individ-
uals had submitted comments to the Commission. In response, the Commission is
preparing a more limited proposal that we hope will reflect the concerns that we
and others expressed.
We hope that the Commissions public comment process on REACH signals the
beginning of a trend. We believe that the Commission should ask for stakeholder
input on all cases, not just in ones as highly visible as this one. We would like to
see this greater spirit of transparency and inclusiveness structurally built-in to the
EU regulatory framework, so that each new regulation also benefits from meaning-
ful stakeholder input. Finally, while the continued use of the comment period would
represent a significant step forward, the Commission should also consider other
measures aimed at increased transparency so that the regulatory process can be-
come more inclusive and less obscure.
HOW ARE NEGOTIATORS INCORPORATING LESSONS LEARNED?
The more we work with our European counterparts, the more we both learn how
to improve our cooperation. Over the years, weve discovered a number of ways in
which we in the U.S. can promote regulatory cooperation and minimize regulatory-
based trade disturbances:
The first key is a strategy of patient engagement.
U.S. regulatory agencies have found that persistent, regular technical exchanges
and dialogues at the working level with their counterparts in the Commission build
rapport and resolve differences more effectively than high-profile diplomatic, polit-
ical, or commercial efforts. In these working level talks, regulators compare their
plans for future regulatory activities, allowing them to share criteria and methodolo-
gies at the inception stage.
However, we should not restrict our engagement to the Commission alone. We
should also continue to engage the EU on multiple levels, including the members
of the Council, the European Parliament, and member state regulators.
One key to success in this area turns on the important role played by our Embas-
sies economic officers. They are our representatives on the ground, providing a
source of early warning on possible regulatory conflicts, while working hard to
spread the U.S. point-of-view to all interested parties in Europe. All too often their
hard work is overlooked.
A second strategy for success relies on the effectiveness of our public diplomacy.
Public diplomacy officers at our European embassies play a critical role in ex-
plaining the U.S. regulatory system and policy to EU opinion leaders and the public.
At the U.S. Mission to the EU, for example, the public affairs office initiated a Dia-
log on Better Regulation between U.S. and EU policy makers and shapers. Four
major conferences have already taken place in this ongoing series of two-day events
that bring together high-level representatives from government and academia to en-
gage in a candid dialog on regulatory issues.
We need to do more to publicize instances when we cooperate on initiatives so
that Europeans and Americans alike can appreciate the strength of the trans-
atlantic partnership. The resulting goodwill will help mitigate the tension that sur-
faces on both sides over issues of regulatory dispute.
Along a similar vein, more resources need to be devoted to shaping European pub-
lic opinion on key issues. Not surprisingly, EU officials often cite public opinion as
10
the basis for their policies, so the support of the Europeans themselves often proves
crucial to the success of our diplomacy.
Ive already talked about how the U.S. can work within EU institutions by engag-
ing all of its relevant institutionsthe Commission, the Council, the Parliament,
the Presidency, and the member states themselves.
In the member states, we should continue to capitalize on the strength of our bi-
lateral relationships by contacting the relevant institutions.
In addition, we can often benefit from greater ties with the European private sec-
tor. For instance, the U.S. government and the European chemicals lobby found that
they had much common ground with respect to the REACH chemicals directive.
Weve also discovered that multilateral approaches sometimes can be used to re-
solve regulatory issues. Outside the EU, international standard-setting organiza-
tions, OECD regulatory reform reviews, and WTO Committee meetings provide the
U.S. with additional fora in which to work with the EU and other parties on regu-
latory issues, and to urge greater transparency and accountability in the EU regu-
latory process. We also capitalize on multilateral negotiations, including environ-
mental negotiations, to build international coalitions to support our approach to reg-
ulation and risk management.
Finally, we can benefit from the support of the scientific and NGO communities
as well as watchdog groups to promote a more science-based regulatory approach.
A fourth key to success is the effectiveness of public/private coordination. The
more the U.S. government and U.S. businesses work together, the more they both
achieve in their relations with overseas regulators. Put simply, disunity dilutes and
undermines the message that were trying to convey to regulators overseas.
Our final key to success rests on the principle of timely intervention.
Through experience weve discovered that once the EU settles on a position, it will
usually try to hold to that position, in part due to the complicated structure of EU
process and politics.
Consequently, we should be prepared to act proactively rather than react, since
the earlier we intervene in the drafting process, the better chance we have of ending
up with a positive outcome. As seen in some earlier examples, the more time regu-
lators on both sides of the Atlantic spend together, the increased likelihood that
they will pre-empt regulatory outcomes that require costly and time consuming ef-
forts to correct. We should think creatively about how to foster greater and more
frequent exchanges among our regulators.
CONCLUDING REMARKS
To sum up, Ive isolated a few goals essential for the future of U.S.EU regulatory
cooperation:
We should continue to press for more meaningful transparency in and access
to the EU regulatory process.
We should work to ensure that American interests are able to make comments
early enough in the EU process to be meaningful, and we should continue to
ensure that Europeans have comparable access to our system.
We should promote informal information exchanges and dialogues between the
U.S. and EU regulators as a way to minimize unnecessary regulatory
divergences.
Along with our EU colleagues, we should continue to work in the spirit of the
New Transatlantic Agenda to develop strategies that help forestall regulatory
discrepancies before they happen or resolve regulatory disputes once they
emerge.
We should encourage interested parties on both sides of the Atlantic to regu-
larly meet and discuss hot issues. (In particular, we should take greater ad-
vantage of DVC videoconference technology that allows for more frequent bilat-
eral meetings without the expense and hassle of travel. The State Department
would happily host such exchanges.)
We also support a more active role for Congress in the process. We recommend
continued and enhanced support for the Transatlantic Legislators Dialogue
(TLD) so that American and European legislators participate in the dialogue on
regulatory policy issues. We note the recent positive video conference between
Congressmen Mica and Congressman DeFazio with their colleagues in the Eu-
ropean Parliament on conflicts between EU Privacy regulations and our need
for access to airline passenger name record data to combat terrorism.
Last, U.S. agencies should continue to work with each other to share informa-
tion and advise on U.S.EU regulatory issues.
11
As a colleague of mine likes to say about the transatlantic partnership, what di-
vides us makes headlines, what unites us makes progress. The U.S. and the EU
dont receive enough credit for their collaborative efforts at regulatory cooperation.
We both realize that if we cant reach agreement on these important issues, every-
one loses, whether in the U.S., the EU, or elsewhere in the world. A more pros-
perous world community hinges on the continued progress of our partnership.
Thank you, Mr. Chairman. I welcome any questions that you and the members
of the subcommittee may have for me.
Senator ALLEN. Thank you, Mr. Ries. Mr. Stewart.
STATEMENT OF ERIC STEWART, DEPUTY ASSISTANT
SECRETARY FOR EUROPE, U.S. DEPARTMENT OF COMMERCE
Mr. STEWART. Thank you, Mr. Chairman. I do appreciate the op-
portunity to be here today and quite frankly, the timing of this is
very good. We have been pending a lot of time at the Department
of Commerce as well as the Department of State and our friends
at the USGR working on these obviously very important regulatory
issues. Because quite frankly, as you indicated in your opening
statement, the requests are coming from industry. Its not the gov-
ernment sitting around saying gee, we ought to do this, its indus-
try who continues to tell us this is the right thing to do and this
is whats most important to us. So your calling of this hearing is
obviously very very timely.
I was in actually Brussels last week having varied discussion
with my counterparts in Brussels, and actually as early as this
morning sat with our 25, the 25 econ officers from the various em-
bassies met here in Washington. We all sat in one room, which ac-
tually was quite daunting when you think about all these varying
countries sitting in one room and trying to, let alone come up with
a regulation they can agree on, but obviously a lot of other larger
issues as well.
I will say, I also share your cautious optimism with dealing with
Europe. When you really think about the amount of trade, as you
indicated earlier, its quite mind boggling, but what we try to keep
in mind as well is where in the organization, or what is the organi-
zation working on with its views. What we try to keep in mind is
that the numbers vary.
Somewhere between 85 and 95 percent of all trade between Eu-
rope and the United States is dispute free, and that doesnt count
chemicals, because we dont know where that one is going to shake
out. But it is a staggering number of the amount of trade that actu-
ally is quite positive.
And you alluded to the company here in Virginia, the German
company. And when you think about the number of employees that
are working for U.S. companies that are in Europe, somewhere in
the neighborhood of 6 million, and the number of employees here,
obviously many constituents of your, here in the United States
working for European companies, somewhere in the neighborhood
of 4 million. So really, obviously our economies are so integrated.
And what we do continue to hear from businesses this year is not
terrorists, which is an issue that we continue to run into in a lot
of other countries. Its the average tariff is somewhere between 1.8
and 2 percent between Europe and the United States. So really
what the issue does come down to, as we hear time and time again,
is regulatory affairs and standards. So obviously, our joint goals in
12
working together is to eliminate this anywhere from 5 to 15 per-

cent friction between our two entities. And I use the word friction,
but I dont use it lightly because 5 to 10 percent is obviously bil-
lions of dollars and is not a rounding error.
As Mr. Ries pointed out in his testimony, there really is a dif-
ference in philosophy in dealing with regulatory affairs, and this is
one of the major hurdles that we continue to try to fight through
with the European Union. In a sense they almost have a top down
way of going about regulatory affairs and I think, although we still
have a lot of issues and concerns with the chemical REACH legisla-
tion itself, that was a very good example of the European Union
taking more of a bottom up, if you will, approach. An 8-week period
of hearing comment, 6,400, as Mr. Ries pointed out, 6,400 com-
ments that came in during that period. And quite frankly, when I
was in Brussels last week meeting with one of my counterparts dis-
cussing this issue, he indicated to me anywhere between 50 and
100 of those 6,500 comments that were received actually were used
and actually made a difference in the legislation and it was actu-
ally implemented, which is a good sign. I mean, its a good start
and thats what were hoping to continue to encourage with the Eu-
ropean Unions overall, you know, Lisbon strategy, if you will.
So in a sense, although we have a lot of difficulties and concerns
with the legislation, clearly with the amount of jobs and amount
of regulations that it will create, the process itself was a step in
the right direction.
One of the other, I think, very large points that you pointed out
in your opening testimony as well is the issue of accession and
whether or not this is going to have a positive effect or negative
effect, and obviously time will tell.
One of the discussions we had this morning with the econ officers
was the fact quite frankly that, you know, it has been difficult up
until this point for 15 of the countries to agree on a lot of these
regulations. Now youre going to have a very different mix of 10
who in a lot of countries, quite frankly, may not have a lot of re-
sources, they may not have a lot of the infrastructure for handling
this amount of new legislation, new directives, new laws that they
will quite frankly have to adopt even to become a member of the
European Union. This is something were going to have to continue,
obviously, to work closely with them on and provide assistance and
guidance to them, as to even helping them point out all the things
that they are adopting by becoming members of the European
Union.
Mr. Ries highlighted a few of the successes that weve had and
Id like to mention a few as well through the TABD process, the
Transatlantic Business Dialogue, that obviously has been sup-
ported by both sides and is now, as you indicated also, being sup-
ported very much by industry. A few areas that we have been able
to establish agreements, which are very positive in the sense of
working together, telephone, electromagnetic capability, rec-
reational craft, and my understanding is very soon to be medical
devices as well.
These are good steps forward.
Obviously, there are still industries that are still in need. One of
the industries that were working on and hoping to have an agree-
13
ment here in the near future is information and communication

technology, ICT. Its one of the major focuses that we have now
turned to because it is obviously such a large industry and it will
help us to continue to bring our regulatory relationship even closer.
There are a few things, and I will try to wrap up quickly as I
know youre tight for time, a few things that we want to work on
and that I have been discussing with my counterparts at the Euro-
pean Union and Department of Commerce, and USGR as a whole
is really obviously to continue to eliminate barriers, thats the bot-
tom line. But one of the other things that we have been discussing
and were hoping to adopt slowly because there are some differences
in how we go about it, is the idea of early notification, the idea of
trying to talk before a regulation or directive is introduced and just
automatically put into place. And quite frankly, a dialog is going
to have to be on a very technical level and a very low level, but
obviously our hopes are to increase that further to a higher level.
The other interesting opportunity that we continue to discuss
with our counterparts is the idea of third country cooperation, be-
cause there are some areas where quite frankly, and I realize this
is focused on European Union, but there are some areas that we
can work together with the European Union in other markets as
well to continue to work on some of the regulatory affairs that we
agree on and ensure those are being adopted in third countries. I
recognize that this hearing is on European Union affairs, but I
wanted to point out one of the positives that we continue to have
discussions with them.
All these things that we continue to talk about obviously in our
minds dovetail very nicely into what Secretary Evans has proposed,
which is an initiative on reducing standards and focusing on regu-
latory affairs, and this is not only going to be some of the things
we discussed but continuing, as I mentioned earlier, to reach out
to the business community, because quite frankly, the business
community tells us what our priorities should be on these issues
in dealing with the European Union in a lot of cases as it relates
to economics and commerce, and we will continue to do that.
We have also created a liaison within the U.S. department of
Commerce to focus on standards and regulatory issues, which he
will be solely focused with working not only with the Department
of Commerce employees but also with our counterparts at State,
overseas, and our three compliance liaisons that are now in over-
seas embassies as well.
With that said, I will wrap up. But just to say, to continue to say
that the EU regulatory cooperation is not just a good idea in our
mind, we see it as imperative. Weve heard from the business com-
munity, weve heard them loud. Weve heard our friends from
across the street here in Congress and recognize that this is a mu-
tual goal not only of the U.S. Government executive branch but the
industry and Congress as well.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Stewart follows:]
14
PREPARED STATEMENT OF ERIC STEWART
I. INTRODUCTION
Mr. Chairman, Ranking Member Biden and members of the Committee, thank
you for inviting me here today. I am honored to appear before the Senate Foreign
Relations Committee Subcommittee on European Affairs to discuss U.S.EU Co-
operation in Regulatory Affairs. This is a topic that has and will continue to occupy
much of the time and energy of my staff. In fact, just last week I was in Brussels
discussing this issue with my European Commission counterparts, and I am pleased
to have the opportunity to share with you and your colleagues our perspective.
II. THE U.S.EU RELATIONSHIP AND ITS IMPORTANCE
The significance of U.S.EU regulatory cooperation should be viewed against the

strength and potential of the overall Transatlantic relationship. I think that no one
here disputes the importance of the U.S.EU ties. From the economic perspective,
the U.S.EU relationship is vital. A few statistics make this obvious.
The European Union and the United States enjoy the worlds largest economic re-
lationship. Two-way U.S.EU trade is over $500 billion annually, and the U.S. and
EU are the largest investors in each others markets.1 Of the $5.2 trillion in foreign
assets owned by U.S. companies, nearly 60 percent of these assets are in Europe.
Similarly, nearly three-quarters of all foreign direct investment to the U.S. comes
from EU investors. The importance of U.S.EU foreign direct investment on the
labor market is clear: U.S.-owned affiliates in Europe employ 6 million European
workers, and over 4 million Americans get their paychecks from European compa-
nies. These economic figures are not just numbers on balance sheets. They account
for the livelihoods of many Americans, including, I am sure, many of your constitu-
ents.2
III. OPPORTUNITIES THROUGH GREATER COOPERATION
I believe it is vital that we embrace the U.S.EU economic relationship as one

that will continue to bring greater foreign direct investment, more transatlantic
trade in goods and services, and consequently more and better jobs for Americans.
We have made considerable progress in reducing the trade burdens on consumers
in both the EU and the United States. Significant trade liberalization has already
occurred: U.S. exports to the EU face an average trade-weighted tariff of scarcely
more than 2 percent while EU exporters face an even lower tariff herejust 1.8 per-
cent.
In order to deepen and strengthen the U.S.EU economic relationship we must
work to eliminate the system friction that our different regulatory regimes can
cause. Foreign regulations can be daunting to outsiders and their mere existence
can be a deterrent to tradeespecially to small- and medium-sized businesses. On
the other hand, greater regulatory cooperation and mutual recognition policies in-
sure trade flows continue to grow as non-tariff barriers are minimized.
Several ambitious initiatives for regulatory cooperation and deregulation in serv-
ices are already underway. The Administration and the European Commission
kicked off negotiations for an open skies agreement at the beginning of this
month, a project that could increase transatlantic travel by up to 11 million pas-
sengers a year, accruing benefits of about $5.2 billion to passengers through lower
fares and increased travel. 3
IV. WHY REGULATION IS A NECESSARY PART OF BUSINESS
Before I share with you existing and future Department of Commerce activities
in regulatory cooperation, I would like to comment on the role regulations play in
international trade.
The purpose of many regulations is to protect consumers and the environment,
but the broader impact on society, such as innovation and progress must be taken
into account. Eighty percent of global trade in manufacturing and merchandise is
regulated, sometimes at multiple levels, and a growing body of EU regulation covers
fifty percent of U.S. exports. EU regulations are often arcane, difficult for foreign
and domestic firms to comply with, and the process by which they are developed
1 U.S. Department of State, Office of the Spokesman. Fact Sheet: United StatesEuropean
Union Relations June 25, 2003, Washington, D.C.
2 Quinlan, Joseph. Drifting Apart or Growing Together? The Primacy of the Transatlantic
Economy Washington, D.C.: Center for Transatlantic Relations, 2003.
3 Reitzes, James and Dorothy Robyn. An Analysis of the Economic Effects of an EUU.S.
Open Aviation Area The Brattle Group, 2003.
15
opaque. The standards mandated by EU regulations can also create market access
problems, as they are often drafted with little or no outside input. As a result, non-
European firms seeking to export to Europe may have to do extensive testing or
even redesign their products. This can be particularly burdensome for small busi-
ness trying to access new export markets. Unfortunately, international regulatory
cooperation is challenging because most regulators are focused on domestic prior-
ities, which can impede competition.
Regulators on both sides of the Atlantic believe not only that they are doing the
right thing but also in the right way. This often means unique and complicated lev-
els of regulation and accountability. As we all are aware, in the United States busi-
nesses must often deal with federal regulators as well as in some cases as many
as fifty state regulators. In Europe, the European Community regulations are en-
forced and often duplicated by fifteensoon to be twenty-fiveMember State regu-
lators. A maze of accountability, a web of constituencies, and complications with en-
forcement result. The EU itself recognizes this and has made moves under its Lis-
bon Strategy to identify better and reduced regulation with the aim of a more com-
petitive Europe. And the U.S. Government has encouraged this process by submit-
ting comments on the Commissions Better Regulations Package in July 2003.
With particular institutions come particular cultures, and regulatory culture influ-
ences how regulations are made and implemented. The European Commission often
invokes the so-called precautionary principle in drafting regulation. The pre-
cautionary principle permits the banning of products in the absence of any evidence
of harm to human health or the environment. This is the guiding principle behind
the recent EU chemicals proposals.
The cost of this approach to regulation can be staggering: the EU chemicals pro-
posal could be read to cover all chemical-containing products, such that most U.S.
manufactured exports to the EU ($143 billion in 2002) could potentially be affected.
Finally, regulation in Europe is often used as a broader political tool. Harmoni-
zation of member state regulations and standards was identified as the key to the
formation of a European single internal market in the 1980s. The effort required
a broad coalition of business and political interests to make it successful. Develop-
ment of this single internal market fueled more ambitious projects for economic and
political unity. Evidence of these spill-over effects is apparent in todays headlines,
not least of which is the nascent European constitution.
V. EXISTING TOOLS
With this perspective on standards and regulations, I would like to outline some
of the existing cooperation projects where my office and the Department of Com-
merce play a leading role.
Since its inception in 1995, the Transatlantic Business Dialogue (TABD) has been
one of our most effective tools for increasing transatlantic regulatory cooperation.
The Commerce Department has played a critical role in facilitating TABDs efforts,
but I emphasize that the business community, not the government, has taken the
initiative. This approach has been enormously successful.
TABD is focusing on lowering transaction costs and minimizing friction between
U.S. and EU governments in order to maintain and increase competitiveness of
businesses on both sides of the Atlantic. U.S. and EU CEOs participating in TABD
have consistently cited what they regard as unnecessary divergence of U.S. and EU
regulatory regimes as hampering transatlantic economic growth. For several years,
TABD has remained committed to convergence of regulations in areas ranging from
dietary supplements, to environmental emissions, to accounting standards. This suc-
cessful forum is expected to continue to focus on convergence of regulations, as well
as on removal of unnecessary barriers created by certain standards, testing and cer-
tification requirements.
Commerce will continue to work closely with TABD to foster U.S.EU cooperation
on regulatory and standards issues. I recently met with my European Commission
counterparts in Directorate General Enterprise and we all agreed that continuing
TABD efforts is crucial.
In the mid-to-late 1990s TABD also provided the momentum that kept the U.S.
EU Mutual Recognition Agreement (MRA) negotiations moving toward a successful
conclusion. As a result, today we have three operational MRA annexes facilitating
trade and reducing testing and certification costs in the areas of telecommunications
equipment, electromagnetic compatibility (EMC) and recreational craft. It is ex-
pected that the medical device annex will be operational soon. If all goes as planned,
the reach of the U.S.EU MRA will be expanded this fall. The goal is to conclude
an MRA with the European Free Trade Area (EFTA) States who are members of
the European Economic Area (i.e., Norway, Iceland, and Liechtenstein). This will be
16
a parallel MRA to the existing U.S.EU MRA and will be restricted to those sectoral
annexes that are operational (i.e., telecom, EMC, and recreational craft).
TABD is also credited with breaking the impasse in negotiations on the U.S.-EC
Guidelines on Regulatory Cooperation and Transparency over language on trans-
parency. TABD recommended text on transparency that allowed us to conclude the
Guidelines. Since that time, the U.S. and EC have launched a number of regulatory
cooperation projects based on the Guidelines, specifically in the areas of auto safety,
cosmetics, food additives, nutritional labeling, and metrology.
For cooperative projects on metrology, the Commerce Departments National Insti-
tute for Standards and Technology (NIST) is spearheading U.S. government activi-
ties. In a joint declaration signed in 1999, the U.S. and EC agreed in principle to
proceed with cooperation in the field of metrology. U.S. and EC technical experts
met in the U.K. in August 2003 and at this time are working to identify projects
that are technically feasible and of clear benefit to both sides. The overarching goal
stated in the Joint Declaration is to support and further mutual recognition of test
reports, calibration and measurement certificates provided for regulatory and mar-
ket place compliance purposes, to improve regulatory efficiencies and facilitate
trade. Projects will be geared to reduce unnecessary duplicative measurements,
tests and calibration requirements and improve regulator confidence in measure-
ments, tests and calibrations performed by qualified laboratories in the U.S. and the
EU.
VI. FUTURE INITIATIVES
These examples of existing efforts I have described are laudable and I appreciate
the countless hours that have already been devoted to them. But if we are to em-
brace a U.S.EU economic relationship that is ambitious and dynamic, our regu-
latory cooperation must similarly be ambitious and dynamic. Existing efforts must
expand while new strategies are initiated. Let us not forget that entrepreneurs and
scientists here and in Europe continue their work. Every year since 1994 the U.S.
has spent more on R&D as a percentage of GDP than ever before. European compa-
nies spend six-times more on research and development than Asian companies. This
means productivity and innovation but also new products, new applications and of
course new standards and regulations.
I would like to assure the committee that we are building on existing initiatives
and breaking new ground in other areas of cooperation. For example, Commerce of-
ficials are exploring a new cooperative project that would complement the U.S.EU
Guidelines on Regulatory Cooperation and Transparency I just described. Through
transatlantic dialogue on proposed information and communications technology
(ICT) regulations and related standards, the proposed project would act as an early
warning system for U.S. companies in the ICT field. The dialogue will focus on
ICT-related issues that fall within the Departments scope and authority.
The proposed project has two primary objectives. The immediate objective would
be the creation of a mechanism, specifically related to the ICT field, to address long-
standing U.S. industry concerns regarding lack of transparency, access, and account-
ability in EU regulatory and standards development process. Initiating regular ex-
changes of information on government-developed regulations is a first step toward
allaying industry concerns. The dialogue will provide the necessary information re-
garding EU regulatory and standards development processes at a sufficiently early
stage to permit industry to respond effectively. The second, long-term objective is
to facilitate direct U.S. industry access to such EU decision-making processes.
Within my own unit, I have urged my staff in the Office of European Union and
Regional Affairs to expand efforts to address EU regulatory and standards policies.
We have developed and are implementing a far reaching Standards and Regulations
Strategy geared to reduce or eliminate market access barriers to U.S. exports due
to EU standards and regulatory policies: (1) in the EU, (2) in third countries, and
(3) in international and multilateral fora. Under the Strategy, work plans have been
launched to resolve the most pressing issues through outreach to U.S. and EU in-
dustry, to government officials in the EU, the Member States, third countries, and
to standards organizations at all levels. The foundation of each work plan involves
close collaboration intra- and interagency to ensure coordinated action within U.S.
government and with outside stakeholders. This Strategy complements Secretary
Evans Standards Initiative and the Bush Administrations Manufacturing Agenda,
both announced in March 2003, and dovetails with the TABDs new focus on stand-
ards and regulations.
At the highest level of the Department, Secretary Evans announced a Standards
Initiative earlier this year, based on eight-points. Standards are key, because they
17
often can be included in regulation, creating divergent regimes and potential trade
frictions. Let me discuss each point in turn.
First, we are developing a Global Standards Activity Assessment to inventory cur-
rent standards-related programs and activities. NIST is already surveying all Com-
merce agencies, and plans to request input from other Federal agencies, from indus-
try, standards development organizations, and advisory committees. At the end of
the process, the Secretary will be presented with internal report on the results of
the activity assessment, with recommendations for going forward.
The second and third points relate to development of enhanced training: an in-
depth training program for our standards attaches based overseas to strengthen
their expertise, and a standards training program for Commercial Service Officers
in overseas posts so that they have a sufficient understanding of the impact of
standards and regulations on international trade.
Fourth, we will develop a Best Practices database so that Commerce officials can
address the challenges industry faces more effectively.
Fifth, NIST will continue and expand distribution of its free Export Alert! web-
based service that provides subscribers with automatic electronic notification of pro-
posed technical regulations in global markets.
Sixth, we have established a dialogue on standards within the Presidents Export
Council. ITA and NIST representatives briefed the PECs Subcommittee on Tech-
nology and Competitiveness on the Departments Initiative earlier this month and
got a very positive response from subcommittee members.
Seventh, we are in the process of hosting roundtables with specific industry sec-
tors to gain a better understanding of industrys concerns and priorities regarding
standards. Additional roundtables will be held for standards-setting organizations
and on compliance and testing methods. Information from these roundtables will
also be fed into the activity assessment noted above.
Eighth, the International Trade Administration has established a new standards
liaison position and recently brought on board an expert to fill this position.
I am confident with the many tools available for addressing standards and regu-
latory issues with the EU, we will enhance the ability of U.S. companies to export
to and compete in the European marketplace. As I indicated earlier in my testi-
mony, the Bush Administration is committed to continued close cooperation with the
business community and EU officials. We believe that open dialogue is one of the
most effective ways to avoid disputes, promote cooperation and lower business costs
for U.S. and European companies.
VII: CONCLUSION
Todays U.S.EU economic relationship has not been built on convenient choices
and simple solutions, but on hard work, critical analysis and energetic cooperation.
For this relationship to continue to prosper, similar energy, creativity and dedica-
tion must be given to regulatory cooperation. U.S.EU regulatory cooperation is not
just a good idea, it is imperative. The Bush Administration is positive that regu-
latory cooperation is the linchpin of a prosperous future economic relationship. My
staff and I are working to make successful regulatory cooperation a reality.
Senator ALLEN. Thank you, Mr. Assistant Secretary. Both secre-
taries have delivered good testimony. I know you have summarized
your testimony, and with your permission I would like to enter it
into the record as written.
Mr. Ries, both of you can comment on this. Some of the questions
I already had you addressed on the chemical issues and accession
countries and so forth. Mr. Ries, you mentioned in yours a concern
on the VAT taxes, and I only say this in passing. The VAT taxes
and the imposition of the VAT taxes for large companies is prob-
ably not a big problem; theyre getting into whichever country has
the lowest VAT tax and sell that way; its just good economics and
makes sense. I would just note for both of you all, if it gets into
assisting small and medium-sized companies, they will generally
need more assistance whether from Commerce or from State. And
again, I know this from my experience as Governor and working
with trade commissions and so forth, the consulate and embassies,
a lot of those folks can be helpful. The VAT tax will harm the
18
smaller companies. And I have read your statements that its un-
certain how the tax will impact small U.S. enterprise.
When others that are not going to be able to put a physical pres-
ence in Europe want to sell on line, they are going to have to figure
out a lot of things and be subject to some kind of confusion in their
approaches. So I would ask you, No. 1, to continue to monitor that.
I know that I will, and I would hope that the Europeans would put
some practicality to that.
The question ultimately, though, is how do you all see, and I
think I will give this to Assistant Secretary Stewart for comments,
where do you see in your secretariat your assistance to medium-
size or small companies who often do not have the resources to de-
vote to studying and overcoming regulatory barriers? Just as both
of you all alluded to, the difficulties of the 10 countries generally
in southeastern and central Europe coming in, and the ability to
comply with all these regulations which are costly, how do you see
your offices assisting those smaller businesses with trying to keep
up to speed and somehow overcome some of those barriers?
Mr. STEWART. Mr. Chairman, its obviously a very good question
and its something we continue to focus on. The Secretary himself
continues to go out and have round tables throughout the country,
the under secretary and on down the line, we continue to reach out
to the business community and quite frankly the small business
community, because we do recognize that they dont have lobbyists,
they dont have a lot of resources to be flying into Brussels and dis-
cussing these issues. And quite frankly, thats one of the things
that we continue to focus on is our outreach.
But at the same time, you know, with technology today with the
Internet, the chemicals legislation is a good example of where a
small business does have opportunity to be able to make comment.
Now granted, its over the Internet and its not a one-on-one discus-
sion which is obviously what you would prefer, but at the same
time it gives that company in Richmond the ability to comment and
make suggestions on a piece of legislation that might be going to
the European Union.
And one of the things, and that all sounds well and good, but one
of the things thats also important and that we put on our shoul-
ders is to get the message out to the small businesses that this
even exists, that there is even a potential issue or potential piece
of legislation that might affect them. So we, again, have been using
the Internet and the web to try to get those messages out.
We have two different web sites. One is the TCC, which is an on-
line sort of subscription, if you will, to technical barriers to trade
and notification on issues that might be coming up. And Export
Alert is another one that is being run out of the Department of
Commerce as well, to allow small businesses to be notified so they
dont have to try to continue to keep up with it themselves.
Senator ALLEN. Thats great. Thank you.
One final question to you, Mr. Ries. Weve seen in the past the
problem with the GE, General Electric-Honeywell case and what
happened there as far as that proposed merger. In the current situ-
ation with Microsoft where there has been a comity so to speak,
using that legal term, do you see the State Department working
with our Department of Justice and the European Commission to
19
ensure that we avert a repeat of the General Electric-Honeywell

case as a result of the European Commissions proposed remedies
for Microsoft?
Mr. RIES. Well, Mr. Chairman, thank you very much. We have
been working on competition policy with the EU for a number of
years, since my days in Brussels working for Ambassador
Eizenstat, who will follow me today. He and I worked very hard to
foster a dialog between our antitrust authorities and then DG-IV,
now DG Competition, which of all of the many EU common com-
petencies or common powers, competition policy is the strongest,
really. The Commission has sole jurisdiction to determine whether
or not activities or mergers affect competition within the European
Union, and even outside of the European Union, if they have an
impact on trade within the European Union.
What we have done is we tried in a number of different ways to
get the FTC and Justice Department antitrust people in close reg-
ular touch on the current issues, cases, findings of law, findings of
policy, and economic analysis. For the most part we succeeded very
very well. There really, you can remember the handful of cases
very clearly where there has been divergencies. Honeywell is one;
Boeing-McDonnell is another one, but there are hundreds of cases
which operate where the antitrust review on both sides of the At-
lantic comes up with largely compatible approaches. Again, thats
been our goal.
I think on the Microsoft case I really cant speak to the dialog
in specifics of the case because it is privileged between the Justice
Department case attorneys and the Commission case attorneys.
But I think I can accurately say that the dialog has been deep and
continuing throughout the course of the case in which our side has
endeavored to reach common evaluations of these very complex
questions of the impact of software sales practices on the markets.
As you know, Mr. Chairman, very well, the key task in any com-
petition policy case is the definition of the market and that is some-
thing that we have to engage very much with the European Union.
We very much hope that the Microsoft case in its final disposition
resembles the hundreds of very successful cases in which success
is defined by a compatible approach on both sides of the Atlantic.
Senator ALLEN. Fair enough, thank you, Mr. Ries. I want to
thank both of you gentlemen. You may get questions from me or
other members for the record. Thank you both for your leadership,
for your efforts, and also your vigor on this important subject.
Thank you, gentlemen.
Mr. RIES. Thank you, Mr. Chairman.
Mr. STEWART. Thank you, Mr. Chairman.
Senator ALLEN. Next we will call our second panel, one witness.
The European Commission, I will say to those listening and in
the room, has been gracious enough to accept our invitation to par-
ticipate in this hearing. We appreciate the cooperation of the Euro-
pean Commission in providing this presentation to the sub-
committee, and we welcome Monsieur Ge rard Depayre, Deputy
Head of the Delegation, for his voluntary appearance here today.
Bien venue, and we would be happy to hear a summary and/or
any remarks you would want to make on the subject.
20
Please understand that your testimony, full testimony if you

wanted to summarize it, will be included in the record.
STATEMENT OF GERARD DEPAYRE, DEPUTY HEAD OF DELE-
GATION, EUROPEAN COMMISSION TO THE UNITED STATES,
WASHINGTON, D.C.
Mr. DEPAYRE. Thank you, Mr. Chairman. I am Ge rard Depayre,
Deputy Head of the Delegation of the European Commission in
Washington, and Im presenting a statement on behalf of the Euro-
pean Commission.
At the outset, let me say that the Commission values the oppor-
tunity offered by this hearing to present its view on U.S.EU regu-
latory affairs and in particular on our cooperation in this area.
Your interest in EUU.S. regulatory cooperation is helpful in fur-
thering our mutual efforts to deepen the Transatlantic Economic
Partnership and in promoting regulatory convergence.
A recent study published by Joseph Quinlan of the Johns Hop-
kins University, which you referred to in your introductory state-
ment, illustrates the importance of making headway in the trans-
atlantic economic agenda. It demonstrates the high degree of inter-
dependence of our two economies. Such intertwining makes it even
more necessary to engage in further liberalization, leading to re-
duction of costs for business on both sides of the Atlantic.
Despite, or perhaps as a result of, this interdependence, it has
become apparent in the last few years that the most significant
barriers to trade between the EU and the U.S. are no longer the
visible barriers such as tariffs. It is now the hidden technical bar-
riers which add cost and frustration to the conduct of business.
Promoting further liberalization thus implies that we resolve
problems resulting from differences in existing regulations, and
that we avoid new problems which would arise from diverging reg-
ulatory developments, i.e., future regulations.
How can that be achieved? A solution to both these problems can
only be reached through the dialog and close cooperation between
regulators. The ideal result should be to arrive at harmonized regu-
lations. Failing this, efforts should be made to ensure maximum
convergence of regulations to both sides of the Atlantic, which
makes possible the mutual recognition of equivalence of regula-
tions.
Resolving problems arising out of differences in existing regula-
tions is often very difficult due to the natural resistance of regu-
lators to accept amendments to the products, to their products. A
solution which requires a clear realization by both sides of the un-
necessary burden imposed to business by two sets of conflicting
regulations could in certain cases be found in movement by two
regulators to a greater convergence, and thus create the basis for
mutual recognition. Another alternatives is the reduction of dif-
ferences and conflicts in the implementation of legislation, when-
ever such legislation leaves adequate flexibility to the regulator.
Preventing problems arising out of new regulations implies that
a dialog between regulators takes place at the earliest stage pos-
sible in the process of establishing regulations. Early preventive di-
alog between regulators, but also involving scientists, consumer
groups, politicians and businessmen, is fundamental. Timely dialog
21
allows us to foresee problems, to reach agreement on their nature

and scope, and either to develop common approaches to dealing
with them or failing that, to settle on the approaches that are as
compatible with one another as possible.
This implies in turn, Mr. Chairman, transparency and the possi-
bility for stakeholders, including governments, to make their views
known before final decisions are made, and that such views are
duly taken into consideration by regulators.
While many countries subscribe to the principles of transparency,
such as public access to official documents and public consultation,
the way these principles are implemented differs widely.
For our part, the European Commission has taken a number of
important steps in recent years to ensure transparency.
Its recent White Paper on European Governance of 2001 calls for
more effective and transparent consultation of civil society and in-
terested parties, as well as for am improved dialog with govern-
mental and non-governmental actors, including third countries.
This new approach combines two essential elements: A set of
minimum standards for consultation aimed at increasing the trans-
parency for stakeholders and for the public at large. A new regu-
latory impact assessment system requiring the Commission to take
economic, social and environmental effects into account when mak-
ing regulatory proposals.
Let me now turn to regulatory cooperation in EUU.S. relations,
but before I turn into the details of our cooperation, I would like
to recall the differences in our legislative and regulatory systems,
to which Mr. Ries alluded earlier. These are the results of different
administrative cultures and historical development on both sides of
the Atlantic. Any comparison between our system should also take
this into account.
First, the term regulation relates to different concepts on both
sides of the Atlantic. While in the U.S. it designates secondary-type
legislation adopted by regulatory agencies based on primary legis-
lation passed by Congress, in the EU it refers to community-wide
legislation, legally binding in member states, the nature of which
could be either primary or secondary.
Regarding the decisionmaking process, technical regulations are
adopted in the EU by the legislative branch, either the Council of
Ministers but more frequently the Council and the European Par-
liament upon a proposal made by the Commission. Since legislation
has to be preceded by a Commission proposal it is necessarily sub-
ject to prior consultation and transparency requirements, those I
referred to earlier.
This is different from the situation where Congress initiates and
passes legislation mandating the subsequent adoption of regula-
tions. This may at times create transatlantic conflicts, as you know.
The Bioterrorism Act and the Sarbanes-Oxley legislation are rel-
evant examples in this respect, not to mention the Byrd amend-
ment.
When it comes to the involvement of stakeholders in the prepara-
tion of the regulations, in the EU we do not have the exact equiva-
lent to your Administrative Procedures Act which imposes largely
standardized formal consultation requirements on U.S. regulatory
agencies. What we have instead are practices developed by the
22
Commissions different directorates general on the basis of the

White Paper on European Governance which I referred to earlier.
While these practices are not as formal as those of the APA, they
are always at least as effective in terms of dialog between authori-
ties and third parties. Indeed, having very formalized procedures is
not always a guarantee for the parties that their position will be
taken into consideration. Here implementation of the Bioterrorism
Act by the FDA is a good case in point.
That being said, let me now turn to the EUU.S. regulatory dia-
log. Based on our 1998 Transatlantic Economic Partnership Action
Plan, the European Commission and the U.S. government devel-
oped in 2002 the so-called Guidelines for Regulatory Cooperation
and Transparency, offering political commitment for a dialog be-
tween EU and the U.S. regulators.
This framework is already up and running in a number of areas.
In particular, ideas and recommendations stemming from civil soci-
ety, such as the Transatlantic Business and Consumer Dialogues,
have received attention. Four initial pilot project to implement the
guidelines were agreed in November 2002. In addition, two new
areas have been agreed recently, cooperation on standards in infor-
mation and communication technology sector, and pharmaceuticals.
It is clear, Mr. Chairman, that these first results, still modest in
relation to the tasks ahead of us, need to be expanded. We are now
discussing ways to make regulatory cooperation a more sustainable
process. This could be done by various means, including the ex-
change of annual work programs, organizing dialogs horizontally
and/or in specific areas, and enabling exchanges of regulators.
It is important to note that our bilateral regulation cooperation
goes far beyond the areas covered by the guidelines, which only
apply to trade in the industrial goods.
Our cooperation now extends to a number of sectors and in the
first place to financial services, the liberation of which could bring
enormous benefits to both our economies. In that context, we are
tackling both regulatory obstacles such as the impossibility for EU
stock exchanges to place trading screens in the U.S., and more re-
cent problems resulting from the Sarbanes-Oxley Act. In dealing
with these issues, we have instituted a dialog with U.S. regulators
which has already yielded some positive results.
We have an intensive dialog on transport security, notably on the
Container Security Initiative and the Passenger Name Record. We
hope this dialog will result in the resolution of problems arising out
of the conflicting requirements of our respective laws and regula-
tions in this field. While we share the underlying security concern
of the U.S. in this area, a balance has to be found between these
concerns and the effects of such initiatives on trade or the protec-
tion of personal data mandated by EU law.
We have, finally, initiated a dialog with the FDA on the imple-
mentation of the Bioterrorism Act and have submitted our com-
ments on the proposed regulations. However, we have so far not
seen any active engagement by the FDA in our dialog.
In the chemical sector to which you referred earlier, during the
ongoing process of formulating its proposals for a new chemical pol-
icy, the European Commission has held early consultations on two
consecutive texts, which were open to all stakeholders from Europe
23
and the rest of the world. When finally adopting its proposals, the
European Commission will take into full consideration and respond
to the thousands of comments received.
Finally, Mr. Chairman, I would not want to end this testimony
without mentioning the transatlantic legislators dialogue, which
has an important role to play in regulatory cooperation. Thank you,
Mr. Chairman.
Senator ALLEN. Thank you, merci beau coup for your testimony.
You addressed so many of the issues and many that our represent-
ative from State, our Assistant Secretary from State and Commerce
addressed. And it is important, I think, that when regulations,
your laws, you use the term laws and we use the term regulations,
are being formulated, that we have the earliest consultation, un-
derstanding, forecasting, give us the opportunity with the trans-
parency that you talk about to have this consideration of the eco-
nomic impacts, the trade impacts and clearly the people of the
countries, of the European Union and the people in the United
States care about our people and care about their safety, their
health, and also their opportunities for prosperity.
So I thank you so much for coming and sharing your views and
sentiments, and it appears to me that if everyone continues to work
consistently in their actions as we have stated here in writing, as
well as by words, the future can continue to be very prosperous and
productive among people who really treasure values of human
rights, dignity, as well as common concepts of free markets and
free enterprise. Thank you so very much.
Now I would like to call up our third panel.
From the private sector, were pleased to have the Honorable
Stuart Eizenstat, co-chair of the European-American Business
Council. Mr. Eizenstat is uniquely qualified to speak from both per-
spectives, as he has served as U.S. Ambassador to the European
Union and Deputy U.S. Treasury Secretary We look forward to
hearing Ambassador Eizenstats testimony on what both sides need
to do to facilitate greater cooperation.
Representing the voice of the business community is Gary
Litman, who has appeared at other times before us, the Vice Presi-
dent of the International Affairs Division of the U.S. Chamber of
Commerce. Mr. Litman will talk about problem areas in our
present day cooperative relationship and ways U.S. Government
agencies might improve the situation.
And we have Mr. Farmer. Mr. Farmer is the General Counsel for
the Bankers Association for Finance and Trade, and an affiliate of
the American Bankers Association. We hope to hear insights on co-
operation in the area of financial services.
Ambassador Eizenstat, go ahead.
STATEMENT OF HON. STUART EIZENSTAT, CO-CHAIR, EURO-

PEAN-AMERICAN BUSINESS COUNCIL, WASHINGTON, D.C.
Ambassador EIZENSTAT. Mr. Chairman, thank you for these hear-
ings, and I hope they serve as a stimulus to reduce U.S.EU trade
and investment barriers. Let me say at the outset that my firm
represents a number of American and European companies with in-
terests in these issues. And even as co-chair of the European-Amer-
24
ican Business Council, my testimony nevertheless represents my

personal views.
I would like to begin by noting that notwithstanding the head-
lines about difficulties on steel, GMOs, bananas and others, we
have a balanced, productive and successful relationship on the
great bulk of our trade, but still far to go. We need a longer term
broader vision of our transatlantic relationship, which frankly, I
have not heard from our previous witnesses, and to set our sights
on a more ambitious goal. That ambitious goal should be, Mr.
Chairman, a barrier-free economic relationship between the U.S.
and the EU by the end of this decade. We should put all of our en-
ergies into achieving this goal.
We need to do so not only through active engagement by the gov-
ernments on both sides of the Atlantic, but a reinvigorated trans-
atlantic business relationship. I helped create the Transatlantic
Business Dialogue in 1994, but the TABD has not played the cen-
tral role it should in recent years, but now with Doug Daft from
Coca-Cola and Niall Fitzgerald from Unilever as new co-chairs,
along with the commitment by Secretary Evans to reinvigorate, I
hope that TABD will help stimulate the achievement of this bar-
rier-free transatlantic economic space.
I would like to highlight up front what I consider to be a crucial
factor in achieving this goal. That is advancing the principle of mu-
tual recognition. Because both the U.S. and EU share high health,
safety and other technical standards, and because regulators on
both sides of the Atlantic generally have confidence in each other,
the U.S.EU should, in my view, focus heavily on expanding rec-
ognition of each others regulatory processes. Broadening this mu-
tual recognition will lower costs for businesses on both sides of the
Atlantic, streamline product development and enhance produc-
tivity. Enhanced mutual recognition could serve as a key step to-
ward realizing the goal Im suggesting of a barrier-free trans-
atlantic economic space.
Quite frankly, the progress that weve made going back to 1998
in having MRAs covering multiple sectors, telecommunications, in-
formation technology, pharmaceuticals, and medical devices, has
stalled in recent years. Indeed, while serving in the Clinton admin-
istration I saw some of the obstacles facing progress, namely that
regulatory agencies cover domestic and not an international focus.
I saw this particularly with FDA in the pharmaceutical sector.
Encouraging greater confidence in regulatory systems across bor-
ders, together with a renewed momentum for MRAs by expanding
their reach into as many sectors as possible, would significantly
contribute to U.S.EU cooperation in regulatory matters.
But let me say very frankly, I have been around this, I have been
in the White House with President Carter, President Johnson, with
the Clinton administration for 8 years, and this will not happen if
regulators are left to their own. It will not happen. There is not a
sufficient dialog, their focus is domestic. It takes White House di-
rection to get them to engage in regular sustained dialog with their
transatlantic counterparts to achieve a level of confidence in each
others regulatory processes that in turn will promote mutual rec-
ognition.
25
In the area of financial markets, there are some good recent ex-
amples. Understanding that a transatlantic capital market cant
function efficiently without a genuinely cooperative regulatory ap-
proach, the U.S. and EU have undertaken productive discussions
on at least two key issues for financial markets; resolving the ap-
plication of Sarbanes-Oxley to European companies and harmo-
nizing U.S. and European accounting rules. These are only the first
steps toward the ultimate goal, a barrier-free financial market.
I applaud the initiative of the International Accounting Stand-
ards Board and the Financial Accounting Standards Board to facili-
tate a convergence between the U.S. GAAP and EU IAS accounting
standards. Under the leadership of EU Commissioner Frits
Bolkestein and Paul Volker, progress is being made in which each
side would recognize the adequacy of the others accounting stand-
ards, the concept of equivalence as Mr. Bolkestein has called it.
Even where mutual recognition of regulatory standards may not
be achievable, Mr. Chairman, cooperation is nevertheless advanced
by pursuing workable solutions, such as the current talks seeking
to clarify the application of Sarbanes-Oxley rules to European com-
panies, requiring European auditors to register with U.S. authori-
ties. Here again, Mr. Bolkestein is working effectively to find a so-
lution, this time with William McDonough. A reasonable deference
to European inspections of European auditors will clear the way for
an agreement.
Just as MRAs can serve as a positive model for improving co-
operation, there are unhelpful examples. The worst of them at this
point would be the chemicals directive you have been good enough
to highlight. This is a timely example of regulation in the wrong
direction.
Senator ALLEN. Mr. Ambassador, Im sorry, I just got a message.
If I dont get there, Im going to miss it.
Ambassador Eizenstat: I understand.
Senator ALLEN. Thank you very much, gentlemen. There will be
two votes. I will be voting at the end of the first vote and right at
the beginning of the second. I will be right back. This hearing is
in recess for, I would say about 10 to 15 minutes. Thank you, Mr.
Ambassador.
[Whereupon, the hearing recessed from 3:27 to 3:45 p.m.]
Senator ALLEN. I thank our panelists and everyone here for your
indulgence and patience. My thanks to you, Ambassador Eizenstat,
for your understanding. We will resume the hearing now, and Am-
bassador Eizenstat, if you would like, please continue with your
statement.
Ambassador EIZENSTAT. Thank you, Mr. Chairman. Before I go
to talk about some unfortunate deviations from what may be
progress in this area, let me clarify one thing. When we talk about
mutual recognition agreements, which again, we did to a consider-
able extent in 1998 and 1999, which I mentioned, they need to be
reinvigorated. What that means is that the U.S. would recognize
the competence of a European country to certify that a particular
product had met U.S. standards.
What we ultimately want to goand thats good, but we want to
go to a broader standard and thats what Bolkestein is trying to do
26
now in getting a convergence between European IAS accounting

standards and our GAAP accounting standards, so that while they
may not be identical, they are sufficiently converged and close that
each side recognizes that the others regulation is sufficient to pro-
tect its interests even though its not identical.
Now one particularly timely example of a regulatory step in the
wrong direction, Mr. Chairman, is the current EU proposal for reg-
ulation of chemicals which we know as REACH, which you were
good enough to mention. It requires manufacturers and importers
of chemicals or products containing chemicals to register their
products with the newly established European Chemicals Agency,
and to provide information on hazard, exposure and risk for 30,000
new and existing substances that are produced and imported in
yearly quantities exceeding one metric ton.
Candidly, it represents exactly the kind of top-down, non-risk
based regulatory approach that impedes progress on achieving a
barrier-free marketplace. In particular, the EU should streamline
the authorization process, which will be dominated by individual
member states who could regulate similar chemicals in different
ways, causing massive confusion and cost. One method for stream-
lining the process is through a more risk-based approach. Simi-
larly, there should be more comprehensive exemptions for sub-
stances which pose low health and environmental risks.
There was a welcome public comment period. It elicited 6,400
comments around the world, from Japan to the United States, and
that has led to some changes. But, permit me to say that the Sep-
tember draft continues to have many of the basic flaws of the ear-
lier draft that impose heavy costs.
Just as I was in Brussels this week, just their own estimate is
$7.5 billion, thats their own estimate, or 7.5 billion euros of new
costs. And that is theirs, Im sure thats the lowest estimate one
will find. It represents a retreat from risk-based scientifically ori-
ented regulation and is a significant step in the wrong direction.
Trade barriers. Both the U.S. and the EU impose numerous bar-
riers to the free flow of transatlantic trade, the most obvious being
one that affects your state as well as many others and that is the
moratorium which has now lasted 4.5 years on genetically modified
products. Farmers in the United States are losing several hundred
million dollars a years in sales. I was able to get as Ambassador
to the first product, a product called ROUNDUP READY soybeans.
We have barely gotten another one since. The EU moratorium is
devoid of any scientific basis. Its based on fear of the public. It vio-
lates WTO standards, and I applaud Bob Zoelick for initiating a
WTO dispute resolution process.
On the other hand, we are hardly blameless. We have adopted
measures that are also questionable and restrict European trade,
in particular the unilateral imposition of tariffs on steel, which
were based more on good politics than good policy. These we re-
jected in the last year of the Clinton administration. Perhaps be-
cause we rejected them, I am sitting here as a private witness and
not as a public witness.
They should be terminated at the earliest possible moment.
Senator ALLEN. Youre a good witness. Go ahead.
27
Ambassador EIZENSTAT. Likewise, the Fly America requirement

imposed on U.S. Government travel limits travel options for hard-
pressed senior U.S. officials and is increasingly dubious in an era
of transatlantic airline alliances and international code-sharing.
We also should work to eliminate investment barriers that limit
investment by U.S. companies in Europe and European companies
in the United States. For example, we limit foreign investment in
areas like airlines and in the broadcast sector, restrictions which
are antiquated in an increasingly integrated transatlantic market-
place. And likewise, the Buy America provisions in the House
version of the fiscal 2004 DOD Authorization Bill undermines ef-
forts to remove remaining barriers and prevents the Pentagon from
getting the greatest flexibility to purchase the best products at the
lowest cost.
Closer U.S.EU antitrust cooperation is also essential to achieve
this goal of a barrier free market to reduce and eliminate, if pos-
sible, the uncertainty and inefficiency that occurs from different re-
sults are on merger, acquisition and competition cases. You were
good enough to mention, Mr. Chairman in your opening remarks,
the divergence in the GE-Honeywell case. Likewise, in the Boeing-
McDonnell Douglas case and when I was in government, the merg-
er was ultimately approved by the EU after the U.S. had approved
it but it was substantially different and in more onerous terms,
causing transatlantic tensions. Sensitivity to U.S. competition au-
thorities in these instances would have been warranted and would
have avoided harm to our efforts to advance transatlantic competi-
tion relations.
Similar sensitivity should be exercised by EU competition au-
thorities, as you were suggesting in your question in their inves-
tigation of Microsoft, particularly when proposing the very remedy,
the unbundling of Microsofts Media Player software in its Win-
dows operating system that U.S. authorities considered and re-
jected. The same approach proposed by the EU was rejected by the
District Court judge approving the Justice Department settlement
in rejecting the approach of the minority states, now only one. The
EU seems to be following that approach and when rejecting that
approach, Judge Kollar-Kotelly stated that unbundling would cause
clear and certain harm to the entire personal computer ecosystems.
The EUs proposed remedies create significant inefficiencies and
could threaten growth in the information technology sector because
it would require Microsoft to ship one product to the EU and an-
other to the rest of the world. I am aware of only one instance
where the U.S. has disapproved of a merger approved by the EU.
The 1991 EUU.S. antitrust agreement is based, as you sug-
gested, on the principle of comity in antitrust investigations, and
dictates that one party to avoid conflicts with the other will recog-
nize the others important interests.
Similar positive cooperation can occur with the establishment of
the U.S. antitrust working groups. Progress has been made already
on mergers, but progress needs to be made on other areas of the
competition laws so that we aim for convergence of views on key
substantive issues.
Just think, Mr. Chairman, of two U.S. companies wanting to
merge, or Microsoft wanting to do business in a particular market.
28
The prospect of having different outcomes in an integrated market

is really a very difficult and uncertain situation which is not good.
Let me conclude by saying there are many examples where we
can create this barrier-free transatlantic marketplace. An excellent
one is the EUU.S. open skies initiative, given the recent legal
competence of the European Commission to negotiate Europe-wide
agreements. So by building on productive efforts like harmonizing
competition and accounting standards, expanding the reach of
MRAs and ultimately moving toward equivalency, while dealing
with counterproductive efforts like the REACH proposal and Buy
America provisions, we can make a major step toward creating a
barrier-free transatlantic relationship.
I cant begin to tell you how much, and Im serious, I appreciate
your hearings, because no one is going to pay any attention to this,
and your hearings will help stimulate everybody to action. And
may I suggest, as Bill Roth, when he was chairman of the Senate
Finance Committee, that if you yourself, if I may be so bold as to
suggest this, will remain engaged with the Commission and with
your counterparts in the European parliament to push these kinds
of issues, you can play a major role yourself in creating this goal
of a barrier-free transatlantic marketplace. Thank you very much.
[The prepared statement of Ambassador Eizenstat follows:]
PREPARED STATEMENT OF STUART E. EIZENSTAT

Thank you Mr. Chairman for the opportunity to appear before the Committee
today on the important issue of U.S.EU regulatory cooperation. I hope that your
hearings will serve as a stimulus to help reduce U.S. and EU trade and investment
barriers. During my service in the Clinton Administration, I devoted considerable
effort to advancing U.S.EU trade relations, and I continue to take a keen interest
in expanding cooperation between these two trading partners, who together account
for nearly 40% of world trade.
In the Clinton Administration, I served as U.S. Ambassador to the European
Union, Under Secretary of Commerce for International Trade, Under Secretary of
State for Economic, Business, and Agricultural Affairs, and Deputy Treasury Sec-
retary. In the spirit of full disclosure, I would first like to inform the Committee
that my law firm, Covington & Burling, represents a number of American and Euro-
pean companies with significant interests in U.S.EU regulatory issues. A number
of the firms clients are very satisfied with the regulatory environment; a number
of other clients are less than satisfied or have company-specific problems on either
side of the Atlantic. I also serve as Co-Chair of the European-American Business
Council (EABC) along with former EU Ambassador Hugo Paemen. But this testi-
mony represents my personal view.
As this hearing concerns U.S.EU cooperation, I would like to begin by noting
that current U.S.EU trade relationsperceptions notwithstandingare, on bal-
ance, quite productive and successful, and have been fundamentally sound for dec-
ades. Indeed, some $3 trillion of trade and investment between the United States
and European Union occurs annually, the great majority of which is unimpeded.
Millions of workers on both sides of the Atlantic owe their jobs to affiliates of U.S.
and EU companies. The U.S. enjoys freer trade relations with the European Union
than with most of its other trading partners. A strong, vibrant and productive eco-
nomic relationship with the European Union is in the United States national inter-
est. Similarly, the United States is the largest market for Europe; strong economic
relations with the United States is in Europes interest as well. Most of the public
attention and press coverage of the EUU.S. relationship focuses on the most con-
tentious, high-profile issues including steel, bananas, and GMOs. Nevertheless, we
must not lose sight of the overall healthy trade relationship across the Atlantic.
We are still far from where we should be. We need a longer-term, broader vision
for our transatlantic relationship and to set our sights on a more ambitious goal.
That overarching goal should be a barrier-free economic relationship between the
U.S. and EU by the end of the decade. Already on the trade side, tariffs are gen-
29
erally low, averaging around 34%. We should put our energy into eliminating regu-
latory and investment barriers.
In achieving this goal, we not only need more active engagement of the U.S. and
EU, we need a reinvigorated transatlantic business relationship. I was pleased to
play a major role in creating, along with the late Ron Brown, the Transatlantic
Business Dialogue (TABD) in 1994. Its purpose was to create business/government
cooperation across the Atlantic. However, in recent years, the TABD has not played
the essential role it should, because governments on both sides of the Atlantic have
not given it the attention it deserves. We now have an opportunity to change that
picture. Douglas Daft, Chairman and CEO of Coca-Cola, and Niall Fitzgerald,
Chairman and CEO of Unilever, have agreed to serve as new Co-Chairs. In addition,
Secretary Donald Evans has committed to a major effort to assure that TABD rec-
ommendations are given serious consideration. The European-American Business
Council is being reinvigorated, and along with TABD, can play a major role in help-
ing to achieve the goal of a barrier-free transatlantic economic space.
MRAs: Mutual Recognition as a Way to Achieve a Barrier-Free Transatlantic Eco-
nomic Relationship
I would like to highlight up front what I consider to be a crucial factor for improv-
ing U.S.EU regulatory cooperation: advancing the principle of mutual recognition.
Because both the U.S. and EU share high health, safety and other technical stand-
ards, and because regulators on both sides of the Atlantic generally have confidence
in their counterparts across the Atlantic, the U.S. and the EU should, in my view,
focus heavily on expanding recognition of each others regulatory processes. Broad-
ening mutual recognition between the U.S. and EU will lower costs for U.S. and Eu-
ropean companies, streamline product development and enhance productivity on
both sides of the Atlantic. Enhanced mutual recognition could serve as a key step
toward realizing what in my view should be the ultimate goal for U.S.EU bilateral
trade: a barrier-free transatlantic economic space.
One of the key early benefits of the creation of the TABD was the development
of mutual recognition agreements, or MRAs. The basic concept behind MRAs was
the simple proposition that products could be tested once and considered to have
been tested in both markets. MRAs generally allow procedures for product assess-
mentsuch as testing, inspection, and certificationto be performed in the United
States and Europe that recognize each others standards. MRAs operate through
confidence in each sides regulatory capabilities and reliance on each sides inspec-
tions and the exchange of inspection reports.
In 1998, the U.S. and EU completed MRAs covering multiple sectors, including
telecommunications and information technology equipment, pharmaceuticals, and
medical devices. These markedly reduce business costs of duplicative tests and in-
spections. Although the emergence of MRAs in the late 1990s raised hopes of an
advancing trend, momentum has since stalled. Indeed, while serving in the Clinton
Administration, I observed first hand some of the obstacles facing cooperative efforts
such as MRAs operating within regulatory systems that are overwhelmingly domes-
tic in focus. In the pharmaceutical sector, for example, the FDA was consistently
suspicious of the capability of some EU Member States to oversee high pharma-
ceutical standards in laboratories. A related obstacle on the European side is the
EUs inclination to regulate at the European level, only to leave enforcement to
Member States, which often results in different levels of enforcement and different
treatment of European and U.S. companies.
Encouraging greater confidence in regulatory systems across borders, together
with a renewed momentum for MRAs by expanding their reach into as many sectors
as possible, would significantly contribute to U.S.EU cooperation in regulatory
matters.
But this will never happen if matters are left solely to individual regulatory agen-
cies, which have a domestic, rather than international, focus. Agencies need strong
White House direction to engage in regular sustained dialogue with their trans-
atlantic counterparts in order to achieve a level of confidence in each others regu-
latory processes. This, in turn, will help promote mutual recognition.
The business community, through TABD and EABC, needs to be proactive in sug-
gesting to governments on both sides of the Atlantic ways to achieve greater mutual
recognition. There is a recent example, in the area of financial markets, of ways in
which mutual recognition can be used to make progress.
Understanding that a transatlantic capital market cannot function efficiently
without a genuinely cooperative regulatory approach, the U.S. and EU have under-
taken productive discussions on at least two key issues for financial markets: resolv-
ing the application of Sarbanes-Oxley to European companies and harmonizing U.S.
and European accounting rules. But these are only first steps to what should be our
30
ultimate goala barrier-free financial market, which would encourage robust com-
petition between European and U.S. exhanges.
I applaud the initiative of the International Accounting Standards Board (IASB)
and the Financial Accounting Standards Board (FASB) to facilitate a convergence
process between U.S. GAAP and EU IAS accounting standardssuch efforts will
help to eliminate barriers such as the EU requirement that all companies listing
on a European exchange adopt IAS standards by 2005. Similar application of mu-
tual recognition could also help to resolve the current unhelpful stance of the SEC
in placing trading screens on the U.S. market for foreign companies; given that
European standards are comparable to U.S. regulation of the financial markets, a
targeted accommodation by the U.S. in this instance would help to support trans-
atlantic market access without harm to investors. Under the leadership of EU Com-
missioner Frits Bolkestein and Paul Volker, former Chairman of the Federal Re-
serve, a great deal of progress is being made. In effect, each side would recognize
the adequacy of the others accounting standards, the concept of equivalence as
Commissioner Bolkestein calls it.
Moreover, even where mutual recognition of regulatory standards may not be
achievable, cooperation is nevertheless advanced by pursuing workable solutions,
such as current talks seeking to clarify the application of Sarbanes-Oxley rules to
European companies, requiring European auditors to register with U.S. authorities.
The EU sees the application of Sarbanes-Oxley to European firms as
extraterritorial, while the US sees the law as a legitimate post-Enron effort to as-
sure the adequacy of audits of companies that choose to list themselves on a U.S
exchange. Here again, EU Commissioner Bolkestein is working effectively to find a
solution, this time with William McDonough, Chairman of the Public Company Ac-
counting Oversight Board (PCAOB), and William Donaldson, Chairman of the SEC.
Reasonable deference to European inspections of European auditors could clear the
way for an agreement. Creatively, Mr. McDonough has suggested a joint registra-
tion, in which firms would register both with their national authorities, and with
the PCAOB, and there would be joint U.S.EU inspection of auditors outside the
U.S.
Just as MRAs can serve as a positive model for improving regulatory cooperation
between the United States and European Union, we also have available, unfortu-
nately, numerous unhelpful examples.
A Step in the Wrong Direction: The EU Chemicals Directive
One particularly timely example of a regulatory step in the wrong direction is the
current EU proposal for regulation of the chemical industry, known as REACH or
Registration, Evaluation, and Authorization of Chemicals. The REACH proposal re-
quires manufacturers and importers of chemicals, or products containing chemicals,
to register their products with the newly-established European Chemicals Agency
and to provide information on hazard, exposure and risk for 30,000 new and existing
substances that are produced or imported in yearly quantities exceeding one metric
ton. Evaluation requires regulators to assess risks for 5,000 substances that are pro-
duced or imported in yearly quantities exceeding 100 tons, and also for substances
in lower quantities if they are of concern. Authorization applies to substances of
very high concern, for which specific permission would be required for certain
uses. In addition, downstream users would be required to carry out additional
testing if the exposure or use of a covered product exceeds that foreseen by the man-
ufacturer. The European Commission appears likely to adopt its proposed regulation
at the end of October 2003.
Candidly, the current REACH proposal represents exactly the kind of top-heavy,
non-risk based regulatory approach that only impedes progress on EUU.S. coopera-
tion in regulatory matters. In particular, the EU should streamline the authoriza-
tion process, which will be dominated by EU Member States who could regulate
similar substances in different ways, to ensure that the system is practical and effi-
cient, while still protecting public health and the environment. One method for
streamlining the process is through a more risk-based approach that would expand
the regulatory focus beyond intrinsic hazardous properties to include the potential
for exposure to the environment. Similarly, more comprehensive exemptions should
be made available for substances whose chemical structures or uses pose low health
and environmental risks.
The public comment period for the REACH proposal was welcome, something not
often seen with EU regulation. It elicited over 6,000 comments worldwide, most neg-
ative. These comments have led to some changes in the revised draft, like the tem-
porary exception of polymers. However, the revised September draft continues to
have some of the basic flaws of the earlier draft and imposes heavy costs on the
chemical industry and downstream users. The REACH proposal represents a retreat
31
from risk-based scientifically-oriented regulation and thus is a significant step in
the wrong direction for US-EU cooperation in regulatory matters.
Trade Barriers
Both the U.S. and EU impose numerous barriers to the free flow of transatlantic
trade. The EUs longstanding moratorium on approval of Genetically Modified Orga-
nisms or GMOs in food products has cost U.S. farmers hundreds of millions of dol-
lars in lost sales annually in the EU. When I was U.S. Ambassador to the European
Union, I was involved in helping obtain EU approval for GMO products like
ROUNDUP READY soybeans. But unrealistic fears of GMO products by the Euro-
pean public has blocked approvals for several years of other safe GMO products. The
EU moratorium is devoid of any scientific basis and, in my opinion, violates WTO
requirements. I applaud the initiative of Bob Zoellick, the United States Trade Rep-
resentative, to initiate the WTO dispute resolution process against the EU.
But the U.S. is hardly blameless. We have adopted measures that are also ques-
tionable and restrict European trade. The unilateral imposition of tariffs on steel
products from Europe and other nations seems to have been based more on good
politics than good policy. We rejected tariffs in the last year of the Clinton Adminis-
tration. A WTO panel has found they violate WTO rules. A recent U.S. government
study has found that while these tariffs have helped the steel industry, they have
damaged a far broader group of steel users, including the U.S. auto industry. They
should be terminated at the earliest possible moment.
Likewise, the Fly America requirement imposed on U.S. government travel lim-
its travel options for hard-pressed senior U.S. officials, and is increasingly dubious
in an area of transatlantic airline alliances and international code-sharing. In addi-
tion, both sides maintain restrictions on the ability of professionals to practice in
each others jurisdictions.Investment barriers
We should also work to eliminate investment barriers that limit investment by
U.S. companies in Europe and European companies in the U.S. We limit foreign in-
vestment in areas like airlines and in the broadcast sector. These restrictions are
generally antiquated in an increasingly integrated transatlantic market. Likewise,
the Buy America provisions included in the House version of the Fiscal Year 2004
Department of Defense Authorization Bill undermine current efforts to remove re-
maining barriers and prevent the Pentagon from having the greatest flexibility to
purchase the best product at the lowest prices.
There are obviously legitimate international security concerns with foreign invest-
ment in general and European investment in particular in certain limited instances.
The Exon-Florio Act and the CFIUS process reflect these concerns. But Exon-Florio
has been used to block foreign investment only in a few instances. However, we
must make certain that Exon-Florio is not used inappropriately. My recent experi-
ence is that a few U.S. agencies would like to bar all foreign investment in critical
infrastructure, even presumably from companies in allied European countries. This
would be a serious mistake and must be avoided. September 11 should not be used
as an excuse to impose new barriers on European investment.
At the same time, we must work hard in a post-9/11 environment to balance na-
tional security interests with maintaining open U.S.EU commerce. This presents
a challenge to new areas. First, the U.S. is requiring extensive passenger reserva-
tion data, which conflicts with EU data protection laws. Hopefully, the EU can pro-
vide a derogation from these laws if it gets reassurance form the U.S. about the
scope of the data required, limits on the time it would be stored, and use only for
the war against terrorism.
The second conflict is with the U.S. demand for inspection of containers at the
ports of EU Member States. The U.S. has signed a number of bilateral container
agreements with individual Member States without recognizing that the European
Commission has legal competence in this area. The 1997 U.S.EU Customs Co-
operation Agreement could be expanded to address container security issues.
Closer Antitrust Cooperation
The U.S. and EU should strive to achieve the same results in major merger/acqui-
sition and competition cases in order to avoid the uncertainty and inefficiency to
business occasioned by differing results. Our marketplaces are similar, and our anti-
trust outcomes should reflect these similarities. One setback for U.S.EU coopera-
tion in regulatory matters arose from the EU decision to block the merger of Gen-
eral Electric and Honeywell approved by a U.S. antitrust authority, using a bun-
dling concept that could make it difficult for companies to offer a range of products.
In the Boeing-McDonnell Douglas case, the merger was approved by both competi-
tion authorities, but with substantially different terms required by the EU, causing
transatlantic tension. Sensitivity to U.S. competition authorities in this instance
32
where the investigation focused on two U.S. companieswould have been warranted
and would have avoided harm to U.S.EU efforts to advance transatlantic competi-
tion relations. Similar sensitivity should be exercised by EU competition authorities
in their investigation of Microsoft, particularly when proposing the very remedy
the unbundling of Microsofts Media Player software and its Windows operating sys-
temthat U.S. authorities had considered and rejected. The same approach pro-
posed by the EU was rejected by Judge Kollar-Kotelly, the District Court Judge who
approved the settlement. In rejecting the approach of the minority of states whom
the EU seems to be following, Judge Kollar-Kotelly stated that unbundling would
cause clear and certain harm to the entire personal computer ecosystem. The EUs
proposed remedies create significant inefficiencies and could threaten growth in the
Information Technology sector because it would require Microsoft to ship one prod-
uct to the EU and another to the rest of the world. I am aware of only one instance
where the U.S. has disapproved of a merger approved by the EU, namely the Air
Liquide/BOC/Air Products merger.
Greater sensitivity in both instances would have found support in the 1991 U.S.
EU Agreement concerning application of competition laws. The 1991 Agreement af-
firmed longstanding principles of comity in antitrust investigations. At its core,
this doctrine dictates that one party, in order to avoid conflict with the other, will
recognize the important interests of the other party in exercising its jurisdiction,
particularly when the substantive issues under review predominantly impact one
party. Similarly positive for cooperation efforts was the establishment of a U.S.EU
antitrust working group comprising representatives from the U.S. Federal Trade
Commission, the Department of Justice, and the European Commission. Progress
has been made on mergers, as in the successful Solvay/Montedison-Ausimont trans-
action, in which divestitures were required on both sides of the Atlantic. Indeed,
multiple mergers illustrate successful instances of U.S.EU cooperation, including
Imetal/English China Clays, Exxon/Mobil, and Halliburten/Dressor. But progress
should be made in other areas of competition law that could further advance U.S.
EU cooperation in competition matters. US and EU competition authorities should
aim to reach a convergence of views on key substantive issues (such as the bundling
of complementary products and services) as well as procedures (such as the timing
of the merger review process).
Conclusion
There are other areas where we can help create a barrier-free transatlantic mar-
ketplace. One example would be a U.S.EU open skies initiative, given the recent
legal competence of the European Commission to negotiate Europe-wide agree-
ments. A liberalized transatlantic aviation marketplace is a worthy goal. By con-
tinuing to build on productive effortssuch as harmonizing competition and ac-
counting standards, and expanding the reach of MRAs, while dealing with counter-
productive efforts, such as the REACH proposal and Buy America provisions, we can
further stimulate the already productive U.S.EU relationship and take a major
step toward creating a barrier-free transatlantic space.
Congress has a strong role to play in these areas. For example, former Senate Fi-
nance Committee Chairman Bill Roth was deeply involved in these issues. I applaud
your initiative, Chairman Allen, and hope you will remain engaged with the Euro-
pean Commission and your counterparts in the European Parliament in working to-
ward a barrier-free transatlantic market.
Senator ALLEN. Thank you, Ambassador Eizenstat, for your stud-
ied and cogent remarks. And well hear from the other panelists,
and I will have some questions. But again, thank you, Ambassador
Eizenstat, for your testimony.
Now wed like to hear, and let me make sure we have the order
here. Mr. Litman is next on our list. Mr. Litman, will you please
proceed.
STATEMENT OF GARY LITMAN, VICE PRESIDENT EUROPE AND

EURASIA, U.S. CHAMBER OF COMMERCE, WASHINGTON, D.C.
Mr. LITMAN. Thank you, Mr. Chairman. Thank you for having
me back. I would like to request that my written statement is
made part of the record.
Senator ALLEN. So ordered.
33
Mr. LITMAN. Thank you. I would like to echo in my remarks most

of what Ambassador Eizenstat said and just make a few additional
points.
Obviously, the U.S.EU cooperation is critically important for
members of the U.S. Chamber of Commerce and the business com-
munity both in the U.S. and the European Union.
Without regulatory cooperation, this market will suffer.
Regulatory cooperation between the U.S. and EU is also essential
for continuous functioning of all multilateral and international bod-
ies and for the global economy as a whole.
It does take place, regulatory cooperation exists in many forms,
as outlined by government witnesses. It also takes place through
associations like ours, within companies.
Sometimes regulators are unaware of the way we are interacting
and actually supplying them with ideas and input that has been
negotiated between companies and industries in the transatlantic
marketplace. There is no shortage of interaction. The challenge for
all of us is to have the political will to get the rulemakers and leg-
islators on both sides to recognize that their actions immediately
affect one integrated transatlantic marketenormous, integrated
and very dynamic.
In economic terms, meaningful domestic regulations are increas-
ingly hard to find. The fact that this market exists is testimony to
regulatory cooperation. Our concern and the reason this hearing is
so important is that past performance is no guarantee of future re-
turns. We want this integration to continue. Our integration be-
tween companies, between businesses and industries, seems to
have outstripped the duality of two regulatory systems to function
with minimum friction.
I think it is instructive to look at the recent agenda of the Euro-
pean Council of Ministers in charge of business. Here are the
points discussed: political agreement on regulating measuring in-
struments; regulation of drugs; regulation of detergents and polit-
ical agreement; consultation on tourism; consumer protection and
consumer credit. Each item affects numerous Americans interests.
Each is potentially a huge boost to the economic growth in the U.S.
and Europe or the source of friction. The question is whether there
is a will in Washington and Brussels to take this into account in
arriving at political agreement.
None of these discussions were developed through a process even
remotely similar to the Administrative Procedure Act in the United
States and thats all right. What matters to us is that we have a
joint transmission mechanism between the two systems and it bet-
ter be a low friction one, because as the automobile dispute and ba-
nanas and others have shown, technical debates become political
traps.
I want to make one point from the point of view of our member-
ship. We have no fear of European regulations. We frequently feel
for Europe when it lurches into regulations.
The much-discussed chemicals policy is a good example of regu-
latory adventures that take our breath away. We have had similar
impulses post-9/11 and we have discussed them a lot with our Eu-
ropean partners. The main point for us is that cooperation does not
require imposing regulatory models on each other.
34
Each model reflects the democratic choice of the policies on the

respective side of the Atlantic, and we need to look beyond the po-
litical assessment procedures.
A better strategy may be creating specific funded mandates to
enable our agencies to consider the impact on transatlantic actors
and companies in each others jurisdiction. It is important to be at
each others hearings or stakeholder consultations. Its even more
important to be heard at these hearings, and that is the method
of political will and done by legislators such as yourself.
We would also recommend that in seeking areas for regulatory
cooperation, both sides would focus on policy areas where the rules
are not being written or that the technologies involved have a two-
way cutting edge. The hydrogen fuel initiative may be an example.
The business community would also welcome an initiative to de-
velop common guidelines for risk assessment of new technologies
and materials.
We suggest that the key missing element in bilateral regulatory
relations is willingness by Members of Congress and members of
the European Parliament to ask hard questions of regulatory au-
thorities about why they fail to accommodate shared transatlantic
economic interests in dealing with regulations. That is the test
from the business point of view. There will be many instances of
failing to agree.
It is also important to make sure that U.S.EU discussions of
each others rulemaking and legislative activities are conducted
outside the World Trade Organization dispute settlement mecha-
nism. Our relations with Europe are different than other nations
and than anybody else in the world. We can take our coordination
much further. Such hearings on regulatory cooperation are hard to
imagine with any other region in the world, and we should recog-
nize that.
Otherwise, we risk politicizing every discussion of standards and
practices. Rather, we may want to consider setting up a number of
panels that do not report to the World Trade Organization, which
is ultimately about terrorism.
In effect, what were advocating is beginning serious work on a
bilateral agreement on the principles of rule making, common in-
formation exchange, and impact assessment.
One last point. The European Union is constantly changing,
which is a challenge for all of us and it is very difficult to expect
leadership in this matter from Brussels.
They are revising their own constitutional treaty, they are revis-
ing their checks and balances. They are setting up numerous new
agencies, from cyber security to health to military procurement,
and many others. Therefore, it is up to us, the United States, to
offer leadership and to invite the Europeans to discuss the need for
this agreement.
Let me make one more point, maybe by way of example. Even
when regulators do a great job coordinating what they are doing,
it doesnt mean that success is assured. A recent example is the
discussions between the EPA and their counterpart in Europe on
emission standards for diesel engines. Regulators used every con-
sultation mechanism available, they discussed like standards for
engine manufacturers both in the U.S. and Europe, produced very
35
much alike agreements on standards for emissions, and the Com-

mission introduced it to the Parliament. And the problem is, they
decided to amend it, giving no thought to the preceding process of
regulatory cooperation. And now everybody is stuck with a political
decision in the European Parliament. As far as we can tell, as far
as our members tell us, it was not an issue of competing with an
American company, it was done out of ignorance or out of inability
to take into account the good work product of regulators.
The bottom line in all these discussions is that without super-
vision the agencies will not find it possible to cooperate. They need
to have a mandate, they need to have funds and they need to have
supervision and leadership, both from the White House and from
the legislative bodies. Thank you, Mr. Chairman.
[The prepared statement of Mr. Litman follows:]
PREPARED STATEMENT OF GARY LITMAN

INTRODUCTION
I am Gary Litman, Vice President for Europe and Eurasia of the United States
Chamber of Commerce. The U.S. Chamber is the worlds largest business federation,
representing more than three million businesses and professional organizations of
every size, sector and region in the country. Tens of thousands of our member com-
panies derive much of their business from trade with European partners, obtain
their capital from European creditors and investors, and build their competitive
edge on the basis of European supplies and human capital. Throughout the last dec-
ade, Europe accounted for half of total global earnings of U.S. companies, as meas-
ured by U.S. affiliate income.1 The Chamber welcomes this opportunity to present
its views on U.S. regulatory relations with the European Union [EU].
The fact that we discuss regulatory cooperation rather than tariffs and quotas re-
flects the depth of the Transatlantic market and its integral nature. With the pos-
sible exception of Canada, no other economic partnership affords companies opportu-
nities to operate so efficiently, almost seamlessly in two distinct jurisdictions. An
ever-improving U.S.EU regulatory cooperation is important for business in order
to preserve the enormous gains of the transatlantic market and prevent any fric-
tions between the two systems from spiraling out of control.
In analyzing regulatory cooperation between U.S. and Europe, we proceed from
the fact that the European Single market is of vital importance to American busi-
ness. The EU is here to stay and grow and we welcome it. Next year will mark yet
another transformation of the EU with the accession of ten new member states, a
new Constitution, elections of a new and more powerful Parliament and a new col-
lege of Commissioners. Through this evolution, the EU will remain based on a social
model and legal regime that are different from the United States and reflect the
European democratic choice. We have no intention to advocate the importation of
the European regulatory practice in the U.S. Nor do we wish our problems on our
European partners. The business community is not advocating the creation of supra-
national regulators for the Transatlantic market. Our goal is to rid this market of
duplicative or incompatible rules. Our ambition is to preserve the flexibility afforded
by two highly sophisticated regulators without always having to fight off the next
crisis in relationships over a specific product, standard, or procedure. In our view,
this goal can only be achieved through political will and engagement by legislatures
on both sides. It is up to the U.S. Congress and its counterparts in Europe to both
compel and enable regulators to cooperate.
The next twelve months will see the reform of most European institutions. Please
note in this regard a submission from the American Chamber to the European
Union, AmCham EU, which represents many of European firms of American parent-
age, attached. This is the best time to show our commitment to regulatory coopera-
tion so that in shaping their institutions, European have confidence that we mean
business in regulatory cooperation.
1 Joseph P. Quinlan, Drifting Apart or Growing Together? The Primacy of the Transatlantic
Economy, Center for Transatlantic Relations, Washington, 2003.
36
U.S.EU ECONOMIC PARTNERSHIP IS ESSENTIAL FOR GLOBAL GROWTH
As we mentioned in our previous testimony before this subcommittee, June 24,

2003, the U.S. commercial relationship with the European Union is unlike any other
we have in size, complexity and degree of integration. Our extraordinary level of
trade is only the tip of the iceberg of our commercial relations. Over 20% of U.S.
exports in goods go to the European Union and European customers consume over
40% of American services. Although we export more to Europe, and Europe exports
more to the U.S. than we each do anywhere else in the world, trade accounts for
less than 20% of transatlantic commerce. U.S.EUrope commercial relations are
much more about investments and direct job creation in each others markets than
it is about trade. Consequently much of this trade is between parent companies and
their affiliates.
Our immense level of investments in each others markets validates that our com-
mercial relationship is balanced, mature and very similar in structure.2 Therefore,
we do not lose jobs to Europe; instead we create jobs in each others markets. Last
year about one in twelve factory workers in the U.S. was employed by one of 4,000
European-owned businesses.3 We have become responsible for each others growth
and prosperity.
It is therefore important to nurture the transatlantic economy and find all pos-
sible means to further develop it. European economists estimate that dismantling
the remaining tariff and non-tariff barriers between U.S. and Europe would add
about one percent to European GDP, accruing in perpetuity, or somewhere between
40 and 50 billion USD. Other studies suggested that the gains for the U.S. economy
would be about 0.5% of U.S. GDP.4 Expansion of the transatlantic marketplace
would directly and immediately benefit millions of Americans and Europeans.
Beyond the Atlantic, U.S. and Europe economic partnership generates worldwide
growth as the principal engine of economic development in the world. Conversely,
a dysfunctional or underdeveloped U.S.EU relationship would have far-reaching
negative consequences beyond the Atlantic shores. The economies of the Middle
East, Africa, Central and South America depend on a well functioning and growing
U.S.EUrope commercial relationship to develop their own economies. The multilat-
eral consequences of this essential bilateral relationship are important to keep in
mind.
Future Regulatory Cooperation Rests on an Honest Assessment of Past Efforts
Prior attempts by the U.S. and the EU to patch their differences and sign mutual
recognition agreements have to some limited extent helped the transatlantic econ-
omy grow, but are far from being satisfactory. They focused on recognition of con-
formity assessment bodies in each others jurisdiction and on guidelines for ex-
change of information between technocrats and enforcement agencies, for example,
in antitrust and competition matters. The record of implementation of various regu-
latory cooperation agreements shows that cooperation only works when there is po-
litical will on both sides of the Atlantic. In other words, the role of Congress and
European legislatures is critical to the success of any agreement on regulatory co-
operation.
Political backing is essential in preventing regulatory divergence because domestic
lawmakers and regulators generally do not take into consideration the impact of the
rules they propose on foreign companies.5 Domestic regulations often clash with the
demands of international trade and investment, and foreign companies typically do
not have a voice in domestic and regulatory processes. Non-cooperation on regu-
latory and legislative matters results in direct costs to companies and consumers,
with the creation of duplicate and non-compatible rules on both sides of the Atlantic.
Frameworks for U.S.EU cooperation exist, notably with the 1997 U.S.-EC Mu-
tual Recognition Agreement [MRA] and its six sectoral annexes. However, these
cooperation attempts appear to have yielded limited gains. Our members indicate
two factors for the limited success of the MRAs: (1) the independence of the regu-
2 Gary Clyde Hufbauer, Institute for International Economics and Frederic Neuman, Johns
Hopkins School for Advanced International Studies, Paper presented at a conference titled
Transatlantic Perspectives on the U.S. and European Economies: Convergence, Conflict and Co-
operation, Kennedy School of Government, Harvard University, April 1112, 2002.
3 Hylke Vandenbussche et al., Enhancing Economic Cooperation between the EU and the
Americas, Centre for Economic Policy Research, London 2002.
4 USITC, The Economic Effects of Significant U.S. Import Restraints, Publication 3201, May
1999.
5 Gregory Shaffer, Reconciling Trade and Regulatory Goals: The Prospect and Limits of New
Approaches to Transatlantic Governance Through Mutual Recognition and Safe Harbor Agree-
ments, The Parker School of Foreign and Comparative Law, Columbia University, Columbia
Journal of European Law, Fall, 2002.
37
latory agencies involved and (2) the lack of committed resources for transatlantic
regulatory collaboration. We should also add the fluid nature of European institu-
tions that are in the midst of a major reform due to enlargement and constitutional
changes. We urge Congress to review the short history that led to the signing of
the 1997 MRA and assess the limited successes and failures of this agreement.
There is no need to reinvent the wheel, especially if the wheels we recreate will lead
us in the same unsatisfactory direction.
We suggest Congress should review the roles played by: (1) the Federal Commu-
nication Commission [FCC] in the implementation of the 1997 MRA Telecommuni-
cations and Electromagnetic Compatibility annexes; (2) the Occupational Safety and
Health Administration [OSHA], a division of the Department of Labor, in the imple-
mentation of the 1997 MRA Electrical Safety annex; and (3) the Food and Drug Ad-
ministration [FDA] Medical Device and Pharmaceutical Good Manufacturing Prac-
tices annexes. Clearly where the U.S. Trade Representative [USTR] office was
ahead of its time with compelling reasons to negotiate swift and ambitious agree-
ments with the European Commission, U.S. regulatory agencies found the
practicalities of cooperation much more questionable, and the resources unavailable.
BASED ON PAST EXPERIENCE, WHAT CAN WE REASONABLY EXPECT AND WANT?
The major problems for U.S. business are not found at the borders. They are not
related to tariffs and quotas, which play a relatively minor role in U.S.EU rela-
tions. Since American companies see themselves very much as part of the European
economy and vice versa, it is the EU and Member State domestic regulations and
public policies which concern us most of all. Internal regulations and practices di-
rectly affect U.S. economic interests at least as much as they crimp the business
of European companies in the same jurisdictions.
As the EU is devising new and much strengthened regulatory agencies and cen-
ters of regulatory power, it is remarkable how little strategic coordination exists be-
tween most of the relevant U.S. and EU agencies. Among the many new agencies
in Europe currently at different stages of development are the European Food Safe-
ty Agency, Cyber Security Agency, European Environment Agency, and Office of
Harmonization in the Internal Market, the Joint Research Centre, the European
Chemicals Agency and probably an intergovernmental defense procurement agency.
Having certainty that regulators on the transatlantic marketplace coordinate their
regulatory activities in a transparent, strategic and efficient way would advance
American business interests. Nothing could be more damaging to business than ad
hoc regulatory forays in the new Europe driven by political expediency, the absence
of regulatory benchmarks and a lack of understanding of how transatlantic business
will be impacted.
It would be particularly valuable to build strong linkages during the process of
establishing new regulatory bodies in Europe. The Transatlantic Economic Partner-
ship [TEP] initiative, launched at the U.S.EU Summit of May 1998 was to promote
a more positive trade agenda. Among other lofty goals, TEP Action Plan should have
improved the dialogue between U.S. and EU regulators. In the process, TEP pro-
posed in April 2002 non-binding U.S.EU guidelines on Regulatory Cooperation,
which so far seem to have produced limited results and are in need of being ener-
gized. Priority agencies that need to develop better lateral coordination with emerg-
ing European counterparts include:
1. National Institute of Standards and Technology (NIST);
2. Food and Drug Administration (FDA);
3. Federal Communications Commission (FCC);
4. Environment Protection Agency (EPA);
5. Securities and Exchange Commission (SEC);
6. Department of Homeland Security (DHS);
7. International Trade Commission (ITC);
8. Federal Trade Commission (FTC);
9. Department of Energy (DOE);
10. Department of Transportation (DOT & FAA).
A vigorous and systematic dialogue between U.S. and European regulators similar
to that in effect on anti-trust matters, thanks to the fairly successful Application
of Competition Laws Agreement of 1990, would allow us to better understand the
impact of European regulations and avoid the surprise in Brussels when a new draft
proposal suddenly becomes another bone of contention with the United States. We
need to look beyond conformity assessment. A better strategy may be a process of
38
sharing regulatory initiatives between agencies with a specific funded mandate to
consider the impact on transatlantic actors and companies in each others jurisdic-
tion. It is important to be able to appear at each others hearings or stakeholder
consultations. There are some good examples of openness to this notion, including
the recent Internet consultation on the European Chemicals Policy Directive. At-
tached is the U.S. Chambers submission to the EU Commission and a set of com-
ments from one of our members with broad interest in the matter. We were pleased
to have the opportunity to comment. We would be even more encouraged if any of
our comments were taken into consideration in the amended text to be released
later this month. The proof will be in the pudding.
At the same time, we need to develop mechanisms that would guarantee consider-
ation to each others views that is commensurate to the important stake we have
in the continuing growth of the Transatlantic market. We would also support rec-
ommendations by the Atlantic Council to encourage the U.S. Congress and the Eu-
ropean Parliament to compare best practices in regulatory policy and rule-making,
and to focus on policy areas where the rules have not yet been written or the tech-
nologies involved are truly transformative (e.g. the hydrogen fuel initiative).6 The
business community would also welcome an initiative to develop common guidelines
for risk assessment of new technologies and materials.
No amount of regulatory cooperation will be sufficient without supervision by the
legislative bodies. A recent example is provided by the Diesel engine emissions regu-
lations in Europe. In this case the U.S. Environmental Protection Agency and Euro-
pean Commission have each proposed comprehensive new emissions standards for
off-road diesel engines ranging from 50HP to 750HP. The respective regulations
would impose a range of emissions limits for specific pollutants and implementation
dates. The two regulators consulted at an early stage in European rule-making proc-
ess. As a result, the Commissions Directive (COM (2002) 765) is aligned with EPAs
proposed rules. Where discrepancies exist, such as between emissions levels, power
categories, and implementation dates, the Commission has intended that a 2007
Technical Review, called for in its proposals, would further align the standards.
Thus, the regulators have succeeded in coordinating sophisticated technical matters.
Nevertheless, the European Parliament is now considering amendments that would
put the Commission Directive further out of alignment with the EPA proposed rule.
If passed, the amendments would require the use of different engine technologies
between the U.S. and EU, resulting in two different engine and machinery product
lines. Each machinery line would be more expensive because of the lower volume
of production over which to recover fixed costs. European machines will be more ex-
pensive to produce and purchase and would be more expensive to operate. Environ-
mental gains will be minimized as well, as the increased cost of new equipment will
inhibit farmers and other equipment owners from converting from older, non-compli-
ant equipment. A better understanding of the integrated nature of the marketplace
by European legislators in this case would save millions to companies and con-
sumers.
We hope that a strategic regulatory dialogue will soon lead to negotiations and
strong mutual commitments between the U.S. and the enlarged European Union.
In fact, the Chamber believes that it is time to start discussing with the European
Union a way to negotiate a bilateral trade, regulatory cooperation and investment
enhancement agreement, similar to the agreement currently under consideration be-
tween Canada and the EU, that would recognize the unique and highly integrated
nature of our common business with Europe and establish clear ways of resolving
regulatory differences. The transatlantic business community does not want the two
regulating juggernauts to impede the exciting business opportunities that constantly
emerge in our extraordinary shared marketplace.
This concludes my testimony.
Senator ALLEN. Thank you, Mr. Litman. You raised some good
points, and I want to followup with you in questioning.
Now we would like to hear from Mr. Farmer.
6 The Atlantic Council Bulletin Vol. XIV, No. 2, Managing Risk Together: U.S.EU Regu-
latory Cooperation, June 2003.
39
STATEMENT OF THOMAS L. FARMER, GENERAL COUNSEL,
AMERICAN BANKERS ASSOCIATION, WASHINGTON, D.C.
Mr. FARMER. Mr. Chairman, as the last witness I will try to keep
my remarks very very brief and ask that my short written remarks
be entered into the record.
Senator ALLEN. So ordered.
Mr. FARMER. And I will not repeat any of the things I said there.
Let me commend you briefly for the inclusion of financial serv-
ices in this discussion. Financial services have a very large and
very unique role in national trade and its not a good idea to treat
them separately from the rest of the trade venture.
My written testimony was limited to process and to the exclusion
of substance, mainly because the issues of substance are extremely
technical and complex and not well discussed in a single hearing
of this kind. But that doesnt imply that there are not major finan-
cial services regulatory issues that still need resolution.
I would especially point to the EU Data Protection Directive
which has been discussed between the U.S. and the EU over a long
period of time and no progress has been made as far as we can tell.
I did not intend to talk about convergence. However, Stu
Eizenstat has made a very very good case for the idea of regulatory
convergence and in the area of financial services that seems to us
to be the way to go. He mentioned accounting standards, which is
certainly an area where convergence appears to be yielding results.
There are indications that Commissioner Bolkestein and Will
McDonough are getting closer and closer to a joint way of dealing
with accounting issues of various kinds, with Paul Volker as well,
and in the financial services sector that could do a great deal. Our
feeling is that the EU Data Protection Directive as far as financial
services is a primary candidate for an approach of convergence.
Let me briefly summarize a few points I did make in the written
statement, which is that in the financial services sector the cooper-
ative mechanisms on regulation between the EU and U.S. are very
far advanced. They have been in the last few years formalized to
the point that both governments refer to these regular discussions
as the U.S.EU financial markets dialog and under that framework
there are regular meetings at the cabinet levels between Commis-
sioner Bolkestein and the Secretary of Treasury. There are meet-
ings at the level of under secretaries and assistant secretaries, and
an agenda which includes, of course, active participation by the
SEC and the Federal Reserve Board, who have the actual power
to make the regulatory adjustments. And that process has been
going well and the industry is very much supportive of it.
However, we do see a few areas for improvement of that mecha-
nism and that is that it really lacks transparency. Now, the nego-
tiators or the discussants on both sides feel that the informality
and fluidity of the process requires microtransparency. However, it
seems to us that the timely input from industry is difficult when
industry doesnt have a good idea as to what the agenda is or is
going to be. This is especially true in looking ahead at develop-
ments, market developments that are not yet on the agenda, in an
area like capital improvements where new instruments appear
very quickly, and having the industry expertise of making forecasts
40
as to what may happen might well be useful, and we would think

that consultancy, even an informal one, might help.
The other area that I join both of my colleagues here in urging
more participation is in the area of the Congress and the European
Parliament talking to each other and learning each others regu-
latory philosophy. The European Parliament is expanding its pow-
ers very rapidly and will have a very major impact, and I think
prevention of the sort of situation Mr. Litman talked about is very
important, and it may be that a timely and regular contact at the
congressional level rather than just ad hoc visits, which are useful,
but might be improved upon.
So that, those are the main areas in which we think this process
could be improved, but I want to say that the EUU.S. financial
markets dialog is a very good model and very promising. Thank
you, Mr. Chairman.
[The prepared statement of Mr. Farmer follows:]
PREPARED STATEMENT OF THOMAS L. FARMER
Chairman Allen and Members of the Committee:
Good Afternoon, I am Thomas L. Farmer, General Counsel of the Bankers Asso-
ciation for Finance and Trade (BAFT) an affiliate of the American Bankers Associa-
tion (ABA). My testimony is on behalf of both BAFT and ABA.
First, I want to commend the Committee for holding hearings at this time on this
subject. At a time when transatlantic political collaboration is strained, good eco-
nomic relations become even more crucial. U.S.EU regulatory cooperation is a cen-
tral element in the transatlantic economic relationship, which merits special atten-
tion. Second, I would like to thank the Committee for inviting BAFT to testify about
the financial services aspect of that relationship. I want focus my comments on a
few aspects, which are unique to the financial markets.
In many respects, the transatlantic capital market is already an integrated mar-
ket. There are numerous examples of U.S. and European firms competing actively
and successfully in one anothers markets. There is considerable data, which indi-
cates that progressive steps to integrate these markets have served to lower the cost
of capital both in Europe and the U.S.thus benefiting economic growth on both
continents. Furthermore, the financial service industry is a highly regulated indus-
try on both sides of the Atlantic and thus highly sensitive to regulatory conflicts
which may prevent effective cross-border activities by either U.S. or European firms.
Finally, the regulatory framework for financial services has, in recent years, under-
gone far-reaching changes both in the U.S. and Europe. In the U.S., the regulatory
landscape was dramatically altered by enactment of the Gramm Leach Bliley Act
in 1999 and the Sarbanes-Oxley Act in 2002. Meanwhile, the European capital mar-
ket is being restructured even more extensively and more rapidly than the U.S.
market. U.S. firms and regulators are especially alert to detect and to hopefully pre-
vent potential conflicts in regulatory architecture, which could hinder the competi-
tiveness of U.S. firms in the European market.
In the development of a single European financial market, it is important to rec-
ognize that the integration of the capital markets has lagged behind the integration
of other European markets. When the EU finally adopted its Financial Services Ac-
tion Plan (FSAP) in 1999, efforts to create an integrated European capital market
began to make significant headway. The self-imposed objective of the FSAP to de-
velop a single integrated EU capital market by 2005 indicates the determination of
the Commission and the member states to move forward expeditiously with this
complex project. The plan envisages 43 separate legislative and non-legislative
measures in banking, securities and insurance. Within the 2005 overall deadline,
there are benchmarks for the completion of individual measures. Somewhat surpris-
ingly, the EU has managed to keep pace with this ambitious timetable and has pro-
mulgated various parts of the FSAP much more rapidly than is normal for EU legis-
lation and rule making.
The U.S. banking industry considers the FSAP highly beneficial for the European,
U.S. and global economies and supports its objectives. At the same time there is the
realization that all politics is local and that the primarily the FSAP is designed
to address domestic European requirements. We were, nevertheless, pleased to see
41
that in a formal report released in June 2003, the European Commission empha-
sized the transatlantic and global impact of its policymaking on financial markets
and urged that this aspect of its work receive special attention in the development
of the next phase of policy. The cross-border impacts of the FSAP were well defined
by the Commission report:
Financial services are increasingly delivered on a global scale. The regu-
lation and supervision of financial markets can no longer ignore the reality
that measures taken by any country or group of countries may have con-
sequences on business undertaken outside that jurisdiction. Measures in-
tended for a purely domestic context may unintentionally require compli-
ance by market operators in other jurisdictions with only a marginal or in-
direct presence in that jurisdiction.
Bilateral regulatory dialogues on financial services may provide a means
for managing regulatory spill-over that may occur in highly inter-dependent
financial markets; especially with the EUs major commercial partner, the
U.S.. We need to cooperate through a continuous and informal dialogue on
how to enhance transatlantic integration of financial markets and how to
deal with global financial issues.
As a potential victim of the spill over effect that concerns the Commission, the
banking industry welcomes the Commissions call for regulatory dialogue with the
U.S. on integration of financial markets and global financial issues.
Fortunately, there already exists a broad and sophisticated transatlantic dialogue
on financial markets, which deserves the attention of your Committee. This trans-
atlantic dialogue functions on several levelsi.e. among governments and regu-
lators, among private sector financial firms and trade associations and among Euro-
pean Parliamentarians and Members of Congress. Furthermore, the governmental
regulatory dialogue on financial services has been active and important for many
years. Until recently, however, it was conducted largely as bilateral exchanges be-
tween Central Bank Governors and regulators in the U.S. and counterparts in EU
member states. More recently, the EU Commission has become the principal partner
of the U.S. in this dialogue on regulatory issues.
Even more importantly the U.S.EU regulatory dialogue has become, in recent
years, significantly deepened and institutionalized to the point that both govern-
ments now refer to this process of consultation officially as the U.S.EU Financial
Market Dialogue. The U.S. Secretary of the Treasury and the EU Commissioner
responsible for the Internal Market and Taxation lead the Dialogue on the Cabinet
level. At the working level, senior officials of the Treasury, the Federal Reserve and
the SEC coordinate U.S. participation. On the European side, the participants con-
sist of the Director of the Internal Market and his staff. At present, the Dialogue
appears informal and open ended and additional issues are put on the agenda as
required. Consultations in this framework have become more frequent so that cur-
rently formal dialogue meetings, at one level or another, occur four or five times a
year.
Consultations on regulatory issues have also intensified among U.S. and Euro-
pean banks. For some years, the President of the ABA has met twice yearly with
the heads of the national banking associations of the OECD member countries and
the European Banking Federation. Progressively these consultations have focused
on U.S.EU regulatory issues to the point where recently the group has issued joint
statements on important regulatory concerns. Additionally, BAFTs European Advi-
sory Council was, in part, established to start a facilitate a discussion of trans-
atlantic regulatory concerns encounter by both our European member bankers and
the BAFT Board of Directors, who are practicing bankers, in their day work experi-
ence. Then jointly advocate agreed solutions to the respective governmental bodies
in both the U.S. and the EU. To a limited extent the transatlantic dialogue on finan-
cial services has also included discussions between the U.S. Congress and the Euro-
pean Parliament. However, these contacts have been essentially limited to a few
members of the House of Representatives and members of the European Par-
liaments Economic Monetary Affairs Committee. The European Commission con-
tinues to encourage expansion of these parliamentary contacts but so far discussions
in this forum are not very substantive or regular.
In conclusion I want to say that while the transatlantic dialogue on regulation of
financial services is going well, it could be strengthened. Although the U.S.EU Fi-
nancial Market Dialogue is still in its early stages, it has already influenced aware-
ness regarding the regulatory philosophy prevailing on the other side. Additionally,
the governmental dialogue appears to have brought about a certain level of regu-
latory convergence, which the financial services industry certainly welcomes. It
must, however, be noted that the agenda and the thrust of the consultation has lit-
42
tle transparency. The governmental participants appear to feel that this is nec-
essary to preserve informality and fluidity in these talks. Nevertheless, this lack of
transparency makes it difficult for the private sector to make a contribution to these
talks. Both parties to the Dialogue have indicated a desire to consider issues or pos-
sible areas of conflict, which have not yet become the subject of legislationwhether
in draft or enacted. Such anticipatory discussions are particularly useful in avoiding
regulatory conflicts, which impact the private sector. But it is precisely in this area
where the private sector, with its sophisticated knowledge of business trends, can
make a uniquely useful contribution. A process of informal but structured consulta-
tions with the private sector might be a way for governments to access private sec-
tor knowledge without encumbering the governmental consultations. As for
strengthening the dialogue between Congress and the European Parliament it is our
view that familiarity with each others regulatory architecture and philosophy might
well contribute to avoidance of conflicting legislation not only with respect to finan-
cial services.
Senator ALLEN. Thank you, Mr. Farmer.
Im going to make some observations here and ask some ques-
tions and maybe followup on some of your comments. All three of
you all and others have mentioned the importance of having dialog
with the parliamentarians, the European legislative branch with
our Federal legislative branch, and you make a good point. Mr.
Farmer stated a prime example of them, and rather than ad hoc
efforts. I have found in my discussions, and there havent been
many, but the few I have had with leaders from Europe is that you
can talk things out, you can discuss them and say why do you do
this this way. I mean, you can be forthright, you have to be diplo-
matic, but you really can just discuss things, haggle them out and
get their perspective instead of reading about it, and everybody
gets a more particular understanding of the others point of view.
So I think, Mr. Farmer, Ambassador Eizenstat and Mr. Litman,
and others have made that comment and thats probably something
that we can do out of the Foreign Relations Committee and would
be a natural for be to start that, as the chairman of the European
Affairs Subcommittee. It would seem to me that we would all ben-
efit from that, and we will discuss things of common interest as
well as some of the areas that have been discussed today. I thank
you all for that idea, which I think is an important one.
Ambassador EIZENSTAT. May I just comment on that one second?
Senator ALLEN. Sure.
Ambassador EIZENSTAT. First of all, particularly under the new
constitution which is going to be passed by the end of this year, the
European Parliament has become a real power, it has real powers,
it has increasing budget powers, it has real legislative powers over
the Commissions recommendations, so its a real body, its a real
legislative body, which one would not say was the case 10 years
ago.
Second, with the exception of some members like Former Chair-
man Ben Gilman when he was chairman of the Foreign Relations
Committee on the House side and now Jim Kolbe and a few others,
the only sustained dialog that occurs is on the House side with a
few members. It doesnt include Ways and Means, it doesnt include
a broad swath of Foreign Relations, and it has never included the
Senate. The Senate has a dialog with NATO over in the Atlantic
Council but not with the EU.
So if you could initiate this, it would really have a dramatic ef-
fect, because when something like the chemical directive goes to
the Parliament as it probably will by the end of October, the Par-
43
liament is going to have to decide whether to try to improve it by

amending it. Without having any contact between our Congress
and their Parliament, they dont hear what they need to hear, so
I think its a tremendous idea and if you did that, I think it would
be extremely well received by the European Parliament. And you
could combine your visits by also meeting with the commissioners,
the executive arm of the EU.
Senator ALLEN. Thank you, and we will try to do that. I think
thats where we have to refer to, Mr. Litman, their efforts to amend
it and improve it, and it would strike me as they pass their laws,
they call them laws, we call them regulations, but you would think
that they would take into account what the economic impact of
these regulations are. You take for example, not just with the
chemical matter but the other, which Mr. Litman brought up on
the diesel standards.
On the diesel standards it strikes me as common sense that
youre going to have the same standards for the diesel engines, just
for the quantity, the mass production, instead of having a diesel
engine, low polluting diesel engine for Europe and a different one
for the United States, as many diesel engine are manufactured by
Mercedes, Volkswagen or whomever, they make good diesel en-
gines, as well as Volvo, General Motors, Ford and so forth, it would
just seem to me so logical for them so say well, how is this going
to help you, how will this make our diesel engine, European manu-
factured diesel engines exportable and usable in the United States
when it is such a big big market.
Europe is a big market for us, the U.S. is a big market for them,
and its hard for me to believe that they wouldnt take that into
consideration or that in the body of the Commissions findings they
did not bring up that harmonization or the symmetry of similar
standards so that it would fit into the U.S. market. Are those con-
siderations not taken into consideration by the European Unions
Parliament when acting on these? Do they not hear from those who
actually manufacture diesel engines that this is going to increase
the cost if they have to manufacture two diesel engines as opposed
to one that meets improved air quality standards for people in both
countries?
Mr. LITMAN. Mr. Chairman, in this particular case actually, the
European Commission did its homework and proposed setting up
a standard that is fully aligned with the EPA proposal. The prob-
lem is that the argument that we have negotiated this with Ameri-
cans does not sound like a compelling argument to many members
of the European Parliament.
Senator ALLEN. Well, thats understandable. They respect their
sovereignty. Of course, theyve given up some of their sovereignty
by creating the European Union.
Nonetheless, they have the right, clearly, to control their own
destiny. And I could imagine the same in this country, that because
the Europeans want to do it this way, that probably wouldnt be
all that compelling an argument for us.
What would be a compelling argument, Ill speak only for myself,
would be the fact that if we do have this symmetry in this regula-
tion or this rule or this law, or this standard, this means that some
company in Ohio, or Kentucky or Virginia, or Georgia, they will be
44
able to manufacture that engine and that engine could also be sold
in all 25 countries of the European Union, to me that makes sense,
its just logical.
Was that not made as an argument that if we have this, these
engines made in Bavaria or Bonn, or wherever it may be, could be
sold into the United States?
Mr. LITMAN. My answer is yes, the argument has been made and
what happens in Europe is the European Parliament is not as ma-
terial an institution and well adapted to accepting input as the
U.S. Congress or national legislations within Europe.
What frequently happens is, because they frequently act in a
rush result without a lot of staff work, the members of the Euro-
pean Parliament tend to play to particular constituents that are far
removed from the economic realities of the country that elected
them. And we have to work both with the members of the Euro-
pean Parliament and with member states so that ultimately at
some point we can make that point and when I say we, its Amer-
ican and European businesses together.
So we go to the governments of Germany and France and Hol-
land and Britain, and make the same point. When the issue comes
up from the Parliament back to the heads of state on the council,
we will be able to have another chance to make the case for eco-
nomic growth of one transatlantic market.
But instances of operating in a vacuum within the European Par-
liament still exist and its one of the reasons we want them to come
here as frequently as they can, and we want to go visit with them
as frequently as we can. Its a new institution, they are still feeling
about for themselves, frankly, and it will get enormous new powers
a year from now.
This is a critical moment to engage them. They hear from indus-
try, they hear from various radical environmental groups.
Its difficult for them to discriminate to do the analysis since they
dont have the mechanisms for that. And they dont have the proc-
esses of hearings like you do.
So you are absolutely right. The case has been made but at the
same time, nothing can take the place of direct legislative comment
like you offered to me, what do you mean by this. That would take
it a long way.
Senator ALLEN. Well, you know, some of the conflicting and the
arguments of different groups and individuals who have strongly
held beliefs, thats the vibrancy of representative democracies, and
there are times when I wonder why the heck we pass some regula-
tions that dont take into account the impact on a small business
or on jobs, or the competitiveness of a state or for that matter our
country. Its best that we try to understand in each country, and
in Europe that they do have different points of view and people
think differently, even within countries obviously.
These are free countries where people think freely. Some of the
demonstrations they have are really something, on the Champs
dElysee and elsewhere when it comes to the agricultural interest.
Let me go through some other points here. Ambassador
Eizenstat, you were right insofar as, in my observations on the
White House being involved. And obviously right now we have so
many key issues with the war on terrorism; trade and jobs obvi-
45
ously are very important. I know Secretary Snow personally well,

and he is certainly making a great effort, as well as Secretary
Evans. But in other cases that I wont get into, but in private con-
versations, its interesting what President Bush has shared with
me in some of the issues that he has been advancing, with Russia
and poultry, for example. The President is concerned about poultry
from Russia and that matters a great deal. Sometimes those coun-
tries really dont understand our standards of cleanliness and
health. And it is important as best we can just listen to President
Bush as he was advocatingand I dont want to breach any con-
fidences, but I know that he has worked hard, I will say that, as
far as U.S. poultry into Europe.
And suffice it to say, your point is well taken that sometimes
even if you do have staff, not in my case, but sometimes staff
doesnt give you the accurate information to make decisions, and so
sometimes the leaders do need to talk face to face with one another
on some of these trade issues.
You might say, oh wait a second, he said this, you get some ques-
tioning that you might not otherwise have.
The other issue that came up from Ambassador Eizenstat and
Mr. Farmer had to do with accounting standards. And from some
of the hearings we did have with a European member on the ac-
counting standards, I thought they were clearer in understanding
the issue of stock options than people in this country. I think gen-
erally accepted accounting principles ought to be generally accepted
and there is no generally accepted way of accounting for the value
of stock options, or the value of stock options, which may be a great
deal or may be nothing. It just depends. And listening to the Euro-
pean leader at a bipartisan hearing, the European gentleman
seemed to understand it better than ours.
And you listen to the comments here of 6,400 different e-mails,
it wasnt on stock options, but on another issue, it strikes me in
some cases that the European Commissioners listen more closely to
reality and the real will of the people than some of our folks sup-
porting the Federal accounting standards in this country. So we
may be actually helped by the Europeans more logical realistic ap-
proach on stock options than some of the hysteria and harmful
ideas that seem to be being pushed forward in this country.
The other issue that I wanted to do bring up with you is, how
do you see this stock option issue, if you feel comfortable, Mr. Am-
bassador or Mr. Farmer? I know this is a financial matter and is
not exactly a banking issue, but where do you see this issue of
stock options whether you attempt to expense them, how do you
value them and so forth going forward in the European Union?
Mr. FARMER. I will pass on that.
Senator ALLEN. Mr. Ambassador, if you have any insight, we
would welcome it.
Ambassador EIZENSTAT. Let me just address a couple of the ques-
tions you mentioned. First on the White House involvement, most
of the agencies in our government are either formally or informally
independent regulatory agencies, FCC, the FDA, and so one has to
be careful about the degree to which you mandate that they do cer-
tain things because they are independent. But without the kind of
White House direction that we try to provide to encourage them to
46
talk to their counterparts and to recognize the fact that they can
accept the standards and certifications at least to our standards,
they simply wont do it. So they need to be pressed, they need to
be pushed. Its not a Presidents job to do it but it is his staffs job
to do it, and they need to be encouraged to think transatlantically.
Second, with respect to accounting standards, I think that what
Commissioner Bolkestein is working toward is not that they would
be identical but that they would converge sufficiently so that we
could each say that they are substantially equivalent and we would
be willing to accept theirs and they would be willing to accept ours
as a condition, for example, of going onto the exchange or being
listed, or the adequacy of auditors.
Senator ALLEN. Would it not be the case though, Mr. Ambas-
sador, that if they had standards, that should certainly be the case,
but if we had standards that were more restrictive, for example on
the issue of stock options, it could make those companies more at-
tractive or less attractive?
Ambassador EIZENSTAT. That is true.
Senator ALLEN. And whether its in Europe or for that matter
Asia, its not as if the whole focus is on Europe, but there is a great
deal of growth in entrepreneurship in east Asia and we could lose
investments.
Ambassador EIZENSTAT. This is clearly one of the areas where
they will have to try to see if they can reach some understanding.
Im not able to say where they are going in Europe. I think in the
United States there is a slow trend toward expensing but there is
a broader recognition that it is very difficult to value options, and
this is certainly an area where there ought to be convergence. I
dont think we should have one area of the Atlantic where we are
expensing them and one area that they are not, so I think there
is a need for convergence there. But I think that with Paul Volker
and Bolkestein, I think there is significant progress in trying to get
their accounting standards and our GAAP standards to a line that
we will be close to being able to say they are equivalent enough to
recognize each others standards.
Senator ALLEN. Mr. Farmer, let me ask you a question on the
Fair Credit Reporting Act, which we must act upon and renew be-
fore we leave here in the House and Senate this year.
How do you seeyou were mentioning some of the data protec-
tion and privacy type issues. How do you see the Fair Credit Re-
porting Act in this country, and I assume you want to make sure
we get it passed, but how do you see that converging, or the sym-
metry there?
Mr. FARMER. Its a vital building block if its renewed without
major changes and with the Federal preemption, which appears to
be in the works, thats very important. However, the discussions
with the Europeans, the issue with the Europeans is whether or
nottheir law provides that data from European consumers may
not be exported to countries that dont have a adequate standard
of privacy and the Commission has the authority to say its ade-
quate.
Senator ALLEN. Do they consider our law
Mr. FARMER. Not adequate, and this debate has been going on
for some time. And even before the FCRA became close to expiring,
47
they were still saying its not adequate. The rationale as far as we
can see, especially in financial services, is very difficult to under-
stand. We do think this is a question of convergence, its not iden-
tical to their privacy standards, but in the last 6 months or so
these discussions have really been put on ice, because part of the
European argument has been well, we dont even know whether
FCRA is going to survive into 2004. So passing this Act should
renew the ability to go back to the table to discuss the convergence.
And again, as Stu said, were looking at standards which are
very very similar, trying to accomplish the same thing but arent
identical, and our contention has been that the FCRA is essentially
a counterpart to what the Europeans use.
Ambassador EIZENSTAT. I would say, Mr. Chairman, that what
we did in the Clinton administration when David Aaron was Under
Secretary of Commerce and took the lead in this negotiation, was
to create a so-called safe harbor for data privacy so that the EU
in the end said that our regulation was sufficient, it was not the
same, but it was sufficient for them to create a safe harbor and not
to apply their restrictions to us. That did not get extended into the
financial services area but the concept was very similar to it.
Mr. FARMER. And that concept with some modification needs to
be worked out and is a very important area. In general, though,
this is not a financial services issue. The European thinking on pri-
vacy in many ways is different than ours and certainly also, some
of the other areas such as security are contentious. So again, I
think this is an area where informal discussions between Members
of Congress and the European Parliament may help bridge a con-
ceptual or cultural gap about what are we all trying to do with re-
spect to privacy, what are appropriate limitations.
Ambassador EIZENSTAT. We also have this coming up on the war
on terrorism because the U.S. is requiring detailed passenger list
information and this puts the European airlines between that re-
quest and their own privacy laws. But here again, what Bolkestein
is trying to work out, and is making some progress, is that if the
U.S. will agree, A, that passenger lists will only be used on the war
on terrorism, and B, that they will only be stored for a certain pe-
riod of time and then they would be destroyed, and C, that scope
would be more limited, than perhaps that can be provided as an
exception.
Senator ALLEN. Im certainly aware of security concerns affecting
travel and tourism to this country, Im not saying that everything
is an economic bottom line, but security and safety are vital, and
weve tried to do things in a way that do not have an exceeding,
or can have an exceedingly adverse impact on our travel.
Well finish off with one final question to Ambassador Eizenstat.
We brought up the Microsoft case. During your time in the Clinton
administration, you were discussing some of the matters you went
through, and also the history on our side as far as starting and
stopping the mergers. The point is, you have been involved in a
number of competition disputes between the United States and the
European Union, including most recently the McDonnell Douglas-
Boeing merger. Do you see the Microsoft case as being different
than those cases?
48
Ambassador EIZENSTAT. Those cases were merger cases, whereas

this is a competition case, but the principle should be the same and
that is, we should be trying to reach a convergence. The U.S. proc-
ess with Microsoft took 5 years with two administrations. There
was finally an agreement with the majority of states, nine states,
later two, then one, ended up appealing. The basic concept that the
judge accepted in the Justice Department decision with Internet
browsers was that there did not have to be an unbundled separa-
tion of the browser from the basic software package, it did not have
to be sold separately, and indeed it would be inefficient to do so.
Now in the third statement of objections with the Media Player,
a very similar concept, is suggesting it has to be taken out. And
this, I think leads to the kind of divergence which is very
unhealthy and it would Microsoft to having to develop and dis-
tribute different versions of its Windows in the U.S. and in Europe.
I dont know any other case where the remedies specifically re-
jected in the U.S. was able to be imposed as a requirement in the
EU.
So in some respects this almost goes beyond some of the other
merger cases, so its a competition case and it sets up a very seri-
ous precedent.
Senator ALLEN. Thank you. I want to thank each of you,
Mr. Litman, Mr. Ambassador, Mr. Farmer, thank you for your
patience, thank you for your testimony and your insight and your
good suggestions, and we will follow through with them in this Eu-
ropean Affairs Subcommittee. Thank you.
The subcommittee is adjourned.
[Whereupon, the hearing adjourned at 4:38 p.m.]
APPENDIX
STATEMENT SUBMITTED BY THE AMERICAN CHAMBER OF COMMERCE TO THE

EUROPEAN UNION (AMCHAM EU)
EUU.S. REGULATORY COOPERATION AND THE BETTER REGULATION INITIATIVE
Effective cooperation between America and Europe on regulatory affairs is crucial

for American businesses operating in the EU. The mechanisms laid down in the
1998 EUU.S. Guidelines on Regulatory Cooperation and Transparency, while posi-
tive, have not yet achieved their goal. Tensions on chemicals and on airline data,
for example, are testament to this. We would like to see greater commitment from
players on both sides of the Atlantic and in varied parts of government to build co-
operation. In this context, it is important to be aware of the EUs evolving debate
on regulatory processes. The EU institutions, led by the Commission, have under-
taken a comprehensive look at current governance procedures and made concrete
proposals for future reform. These will continue to be worked over the coming years.
In this paper we give background to this debate and to the American ChaAmCham
EUs involvement and positioning.
The EU Governance Debate and the Better Regulation Initiative
In 2001 the Commission issued a White Paper on Governance in Europe, leading
to a wide debate between all stakeholders in the European regulatory environment.
AmCham EU played an active part in this process, realizing that a more balanced,
transparent and coherent regulatory process was critical for U.S. businesses seeking
to engage in discussions on legislation that affected them. The outcome of this de-
bate was the Better Regulation initiative.
The initiative consists of two packages of communications published in June and
December of 2002 and addresses a number of objectives identified by the business
community. In its recent position paper on the initiative AmCham EU expressed
broad satisfaction with the work undertaken by the Commission. Both the objectives
and the proposed action largely coincided with AmCham EUs consistent call for
wiser regulation, basing the choice of policy instruments upon clear and transparent
rules, systematic impact assessments, better coordination of community initiatives,
objective justification for policy choices, adequate and timely consultation and better
implementation and enforcement of existing legislation.
The challenge for business and other stakeholders now is to hold the European
Commission to its promises. AmCham EU welcomes the Senates commitment to
regulatory cooperation and transparency in its cooperation with the EU. We hope
that the Senate will work with us to achieve a full implementation of the Better
Regulation Initiative.
AmCham EU saw six areas of the initiative as critically important.
1. Communication on a reinforced culture of consultation and dialogue1
In this document the Commission seeks to establish general principles and min-
imum standards for consultation with all stakeholdersincluding governments and
businessin all major new EU initiatives. The key elements in the document are:
the assertion that that the guidelines, while not legally binding per se, will be
de facto binding on all departments of the European Commission (Directorates-
General);
the obligation for all Directorates-General to report on progress implementing
the consultation principles and minimum standards as part of an annual report
on Better law-making;
1 COM (2002) 704.

(49)
50
a call on interest groups to monitor the Commissions progress;
the timeframe for comments. For the majority of proposals, this will be eight
weeks. Feedback to comments received will be provided through the explanatory
memoranda accompanying legislative proposals. In addition, the results of con-
sultations undertaken in conjunction with the impact assessment process will
be summarized in related reports.
While respecting the non-legally binding nature of principles and standards,
AmCham EU recommended that their implementation be monitored, assessed and,
where necessary, corrected on a continuous basis.
2. Communication on impact assessment 2
This Communication proposes adopting a single approach for impact assessments,
integrating current (but diverse) practices in the areas of environment policy, trade,
business, etc. Detailed guidelines for implementation are under development. Im-
pact assessments will be applied to all major initiatives and will help determine the
appropriate policy instrument.
In response to this measure, AmCham EU called on the Commission to develop,
in consultation with interested stakeholders, a clear methodology and process for
impact assessment that will be applied uniformly. We also encouraged the develop-
ment, by the Commission and interested stakeholders, of a set of common defini-
tions of the policy options and alternative instruments available to legislators and
the establishment of criteria for their application.
3. Communication on simplifying and improving the regulatory environment 3
The Communication focuses on the three main parts of the legislation cycle: prep-
aration and presentation of legislative proposals by the Commission; discussion of
proposals by the European Parliament and the Council; and application of legisla-
tive acts by Member States. It identifies a number of areas for Commission action.
AmCham EU strongly supported the Commissions commitment to avail itself of
opportunities to withdraw legislative proposals and create its own internal network
for better regulation.
4. Communication on updating and simplifying the community acquis 4
The acquis communautaire refers to the existing body of EU legislation. This
Communication looks at:
simplification, consolidation and codification of the acquis;
reviewing the acquis organization and presentation;
ensuring transparency and effective monitoring at political and technical level;
establishing an effective implementation strategy.
It also highlights the need for new legislative proposals to be developed in line
with better regulation guidelines.
In response, AmCham EU called on the Commission, in the context of its efforts
to consolidate and codify existing laws, to rethink legislative approaches where prac-
ticable and necessary, so that the simplification process supports the larger goal of
better regulation.
5. Proposal to amend comitology procedures 5
The comitology procedure is one of the more opaque aspects of EU policy-making,
but basically refers to the method by which the Member States oversee the work
of the Commission as it implements some technical aspects of EU legislation. The
proposal would give a greater role to the European Parliament in this process, to
better account for the European Parliaments extended role as legislator.
AmCham EU believes that the Commissions proposal to balance the powers of
the Council and the European Parliament in the comitology process is indeed a nec-
essary step.
6. Communication on the better monitoring of the application of Community
law 6
Law passed at the European level is directly binding, but its implementation re-
quires the Member State governments to transpose it into national legislation. The
differences between theory and practice present a consistent challenge for busi-
2 COM (2002) 276.

3 COM (2002) 278.
4 COM (2003) 71.
5 COM (2002) 719.
6 COM (2002) 725.
51
nesses operating in the EU environment. This communication seeks to improve this
situation by encouraging those drafting legislation in the Commission to anticipate
difficulties in transposition for Member States.
AmCham EU has consistently called for a coherent approach to implementing and
enforcing EU law and therefore fully endorsed the objectives of this Communication.
We recognized and supported the shift in focus that underlies this Communication.
Conclusion
AmCham EU would encourage the Senate to build a constructive transatlantic di-
alog on regulatory cooperation and to continue to underline the importance of the
European Commissions work on better regulation. Successful dialog on regulatory
cooperation can only bolster the initiatives undertaken by the Commission, leading
to a more balanced, transparent and coherent regulatory process in the Europe. This
will allow U.S. firms to grow and develop, bringing greater prosperity on both sides
of the Atlantic.
STATEMENT SUBMITTED BY THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA
COMMENTS ON THE EU COMMISSION CONSULTATION DOCUMENT CONCERNING THE REG-

ISTRATION, EVALUATION, AUTHORIZATION AND RESTRICTIONS OF CHEMICALS (REACH)
The Chamber of Commerce of the United States is the worlds largest voluntary
business federation, representing more than three million American businesses from
every sector and region of the United States. Thousands of our member companies
derive much of their business from commerce with the European Union and there-
fore have a major stake in a well-functioning and growing U.S.EU marketplace.1
Therefore, the U.S. Chamber of Commerce greatly appreciates the opportunity to
comment on the EU Commissions Consultation Document Concerning the Registra-
tion, Evaluation, Authorization and Restrictions of Chemicals (REACH) [Chemicals
directive proposal] before it becomes law and seriously affects our member compa-
nies as well as the transatlantic commerce as a whole.
The U.S. Chamber of Commerce has three major concerns with the proposed
Chemicals directive.
1. The regulation risks dampening the transatlantic economy;
2. The regulation advances questionable policies and goals without a realistic
cost-benefit analysis;
3. The regulation has structural flaws that may result in unintended effects and
inequitable treatment of American companies and products.
I. Economic Impact
Chemicals are a critical component of transatlantic trade in industrial and con-
sumer products. Each year, the U.S. exports more than US$20 billion worth of
chemicals to Europe and invests in the EU more than US$4 billion in the chemical
and related sectors. 2 U.S.-owned affiliates and subsidiaries based in Europe re-
search, develop, manufacture, and market within Europe and export outside the EU.
U.S. exports of downstream products made with chemicals to the EU are well over
US$400 billion annually. U.S. companies and consumers also purchase considerable
amounts of chemicals and products made with chemicals from the EU. The U.S. im-
ports from the EU more than US$40 billion worth of chemicals per year.
Given this scale of U.S.EU commerce in chemicals and products derived from
them, any major regulation affecting this trade will also have an effect on the over-
all transatlantic economy. In the proposed Chemicals directive, the EU Commission
sets out to overhaul the rules of operation of a successful and well-functioning in-
dustry that has been at the forefront of innovation,3 investments, employment, so-
cial and environmental welfare and economic growth. Therefore, the objectives of
the Chemicals directive must be compelling to justify the considerable costs and
risks the regulation will generate.
1 U.S. Chamber of Commerce Testimony before the U.S. Senate Foreign Relations Committee,
Hearings on U.S. Relations with a Changing Europe: Differing Views on Technology Issues,
June 24, 2003.
2 U.S. Department of Commerce and American Chemistry Council (ACC).
3 About 90% of all industrial innovations can be traced to innovations from the chemical in-
dustry. European Chemical Industry Council (CEFIC).
52
Several credible studies have recently been conducted to assess the probable eco-
nomic impact of the Chemicals directive proposal on key member states, including
France and Germany.4 According to these studies, national GDPs will be negatively
affected, hundreds of thousands of jobs will be lost, and companies, especially small
and medium size enterprises (SMEs) will suffer. Considering the level of integration
and interdependence of U.S. and EU economies, the U.S. Chamber of Commerce is
concerned that the U.S. economy will also be negatively impacted.
The U.S. Chamber of Commerce is also concerned that the Chemicals directive
proposal will undermine European competitiveness at a time when member states
are tackling difficult but vital socio-economical reforms and taking significant steps
to reduce regulatory burdens. 5 A loss of economic momentum in Europe would go
against the economic interests of American business.
II. Premises, Principles and Lofty Goals
The U.S. Chamber of Commerce is concerned that the Chemicals directive pro-
posal overly emphasizes the dangers of chemicals per se over the risk of exposure
to known hazardous chemicals. The directive does not adequately take into consider-
ation sound scientific risk assessment methods and cost-benefit analysis to justify
its regulatory reform proposal.
Companies are already well aware that certain chemicals that they produce or use
are hazardous. U.S. and European companies already take precautionary measures,
including extensive testing, to assess toxicity and exposure risks. It is not in any
companys interest to underestimate the human and environmental risks posed by
chemicals to its workers, customers, consumers or unrelated parties. U.S. and Euro-
pean governments have a proven record of regulating the industry and have in the
process successfully assisted companies in the challenging task of protecting hu-
mans and the environment.
Chemical testing is an ongoing process that requires active collaboration between
companies and governments. No amount of registration and authorization in itself
generates scientific certainty. Results of one day could be contradicted by the obser-
vations of another day, and scientific research is always reassessing its findings.
Thus, testing for all imaginable risks can be carried on practically ad infinitum. In
this respect, companies and governments share the responsibility to constantly min-
imize risks to humans and the environment by reducing the exposure potential of
the most hazardous chemicals. Other products should be allowed on the market if
they comply with performance standards rather than be presumed harmful until
proven otherwise. Therefore, testing should not be a condition for market access for
most chemicals and for most products containing chemicals.
Extra-precautionary treatment of chemicals, as proposed in the Chemicals direc-
tive, can be justified in known cases of hazardous chemicals. On the other hand,
it does not make sense to apply the same regulatory treatment to well-known and
harmless chemicals. Applying a one-size-fits-all approach to all existing chemicals
and all existing downstream products on a permanent basis would be costly and un-
necessary.
In addition, regardless of the costs and of the implementation difficulties that the
directive would entail, it is not certain that the directive could actually achieve its
ambitious goals. What is known is that imposing blanket testing and certification
requirements on most chemicals for all imaginable risks will impede innovation, sti-
fle development and insert all sorts of bureaucratic intermediaries in the process of
bringing goods to the market. It is questionable how this heavy burden on compa-
nies would in fact deliver the health and environmental benefits sought by the regu-
lators. Another license filed with yet another regulatory body does not necessarily
reduce any risks unless it guarantees that a science-based risk management process
has been implemented.
The U.S. Chamber of Commerce is therefore urging the EU Commission to
streamline the directive proposal to prevent the costly and unnecessary overhaul of
a well-functioning industry and avoid the testing of thousands of well-known chemi-
4 The Likely Impact of Future European Legislation in the Area of Chemical Substances,
April 2003, Mercer Management Consulting study under the supervision of the UIC (Union des
Industries Chimiques), the French Ministry of Ecology and Sustainable Development, and the
French Ministry of the Economy, Finance and Industry. Economic Impact of the EU Substances
Policy, October 2002, Arthur D. Little GmbH study under the supervision of Bundesverband
der Deutschen Industrie (BDI).
5 See CEFIC News Release, June 27, 2003, reporting statements made by President Chirac,
Chancellor Schroeder and Prime Minister Blair at the EU Council in Thessaloniki, Greece, June
1920, 2003. See also comments made by CEFIC President Eggert Voscherau at CEFIC General
Assembly, Hamburg, June 27, 2003.
53
cals.6 The Chemicals directive proposal should instead target the most hazardous
chemicals that pose known risks to humans and the environment. By setting prior-
ities, the directive proposal would be more cost-effective.7
Crucially, the European Union should continue to encourage research into all as-
pects of chemical science and technology in order to develop insights into the haz-
ards and risks associated with any products. As risks become known and under-
stood, the business community will continue to embrace science-based risk manage-
ment consistent with health and environmental goals. A sound scientific risk assess-
ment basis for the Chemicals directive proposal would prevent unnecessary work,
innovation delays and bureaucratic hassle.
III. Flaws and Unintended Consequences
The Chemicals directive proposal contains various structural flaws, which could
result in unintended consequences that may unfairly harm non-EU companies.
Below are some of the issues that most concern our members.
(a) WTO Compliance: The U.S. Chamber of Commerce is particularly concerned
that some requirements of the directive at registration, testing and authorization
levels could impede access to the EU market for non-EU companies and products,
if not by design then in practice. Therefore, we urge the Commission to address the
WTO compliance of the proposed directive and notify the WTO Secretariat of its pro-
posed directive. Under no circumstances should the proposed directive establish
technical barriers to trade and impediments to investments.8
(b) Decentralized Authorities: The U.S. Chamber of Commerce is also concerned
by the two-tired administrative system that splits responsibilities between the cen-
tral (EU level) authority and the Member States national authorities, which will
both administer the registration, evaluation and authorization of chemicals. With
twenty-five national authorities and one central administration involved, all of them
dealing with thousands of applications at once, the system will be prone to ineffi-
ciencies and distortions. Administrative bottlenecks and discrepancies will create
frustrations and complaints that will be at best difficult to manage.
(c) Transparent and Fair Review Process: Any rejection of an application and any
prohibition of a chemical must be subject to a fair and unbiased review and appeal
process. Applicants, including non-EU companies, must be able to appeal any deci-
sions at the national and EU levels based on sound scientific grounds. The U.S.
Chamber of Commerce urges the Commission to ensure that a fair and science-
based review system be implemented to avoid any appearance of discrimination
against non-EU companies and products.
(d) Substitution: Substitution should not be an objective in itself.9 Comparative
scientific risk assessment studies, as well as comparative availability, affordability,
functionality and socio-economic cost/benefits studies of existing and alternative
chemicals must be undertaken before the EU imposes a substitution.
Market forces and international competition have encouraged innovation and sub-
stitution much more than regulation would achieve. Substitution with better prod-
ucts is a major factor of competitiveness. As long as companies are allowed to freely
compete, innovations and substitutions will continue to occur for the benefit of con-
sumers.
(e) Responsibility Burden: The proposed reversal of liability burden from public
authorities to industry is creating legal uncertainties, which will notably alarm in-
vestors. Among these uncertainties, the imposed sharing of burden between chem-
ical producers and downstream users could result in unnecessary disputes. Down-
6 According to a study conducted for the EU Commission Business Impact Assessment of EU

Chemicals Strategy by the consulting firm Risk & Policy Analysts (RPA), May 2002, testing
alone comprises 88% of the total testing and registration costs. Thus, considerable savings
could be achieved by avoiding the testing of already tested chemicals.
7 The U.S. Chamber of Commerce respectfully suggests the EU Commission review cost-effec-
tive U.S. risk assessment policies. See for instance Science and Judgment in Risk Assessment,
Committee on Risk Assessment of Hazardous Air Pollutants, Board of on Environmental Studies
and Toxicology, Commission on Life Sciences, National Research Council, the National Acad-
emies Press, 1994.
8 The U.S. Chamber of Commerce urges the EU Commission to assess WTO compliance of its
Chemicals directive proposal before disputes emerge. Several independent legal assessments
have already suggested non-compliance after review of the EU White Paper, Strategy for a Fu-
ture Chemicals Policy. See for instance Crowell & Moring trade law analysis, November 7,
2002. See also American Chemistry Council letter to DG Trade Commissioner Pascal Lamy,
April 16, 2002.
9 See EU Committee of the American Chamber of Commerce in Belgium (AmCham EU) Posi-
tion Paper on the Future EU Chemicals Policy, May 17, 2002.
54
stream users of chemicals may have differences with upstream users and/or pro-
ducers based on their different knowledge and the scientific data (both evolving over
time) they may have on the production and particular usage of certain chemicals. 10
Putting the regulatory burden on both the producers and users, while exonerating
governments responsibilities to protect the public, could create grounds for costly
and disruptive disputes, and eventually dampen innovation and private sector in-
vestments.
(f) Uncertainties: The Chemicals directive proposal will generate uncertainties as
to whether certain chemicals will ultimately be authorized (i.e., reproduction of the
pharmaceutical industry system). However, chemical companies and downstream
users will not be able to recoup the cost of these uncertainties, because the market
will not allow companies to price chemicals and related products at premium prices.
This will result in reductions of investments, innovations and jobs.
(g) Intellectual Property: The Chemicals directive proposess a data-sharing re-
quirement, which will put confidential commercial information at risk. The enor-
mous amount of data that will have to be provided to regulatory authorities and the
sharing arrangements between companies promoted by the directive for the sake of
savings on testing costs and animal lives, are bound to compromise confidentiality.
The U.S. Chamber of Commerce urges the EU Commission to ensure, in far strong-
er terms than currently suggested, that the data-sharing scheme will not com-
promise sensitive commercial information and give away trade secrets, and that no
intellectual property rights will be violated. The rights of the data owners should
receive a high level of protection.
(h) Competition: The data-sharing system could create situations of collusion or
perceived collusion between competitors. It could notably favor non-competitive be-
haviors between EU companies against non-EU companies. The U.S. Chamber of
Commerce urges the EU Commission to review all possible anti-competitive effects
of the data-sharing scheme in order to prevent illegal anti-competitive behavior, no-
tably against importers.
Any such anticompetitive practice would particularly hurt small and medium
sized enterprises (SMEs), which lack the resources to fight against coalitions of
large companies. SMEs would also have more difficulties and less means to acquire
needed data sets, owned by larger and more powerful groups of companies, or other-
wise meaningfully to participate in legitimate data sharing schemes.
(i) Consumer Scare: The Chemicals directive proposal risks creating consumer
fears based on quasi-scientific information, which could cause unjustified consumer
reactions against the purchase of certain products. This could lead to discrimination
against some imported products.
(j) Mutual Recognition: The Chemicals directive proposal does not give sufficient
consideration to the international ramifications of the regulatory overhaul it envis-
ages. Specifically, there is clearly room for mutual recognition of testing facilities,
data sets and results from non-EU countries, including the U.S. Some of these coun-
tries, including the U.S., have at least equal testing facilities and scientific assess-
ment capabilities. U.S. companies have collected years of useful and valid data. Mu-
tual recognition would save on cost, time and effort. In the case of the U.S. and the
EU, mutual recognition would promote regulatory cooperation in the most important
market of the world.
The U.S. Chamber of Commerce urges the EU Commission to consult and cooper-
ate with relevant U.S. government and regulatory agencies and work together on
mutual recognition guidelines and protocols. The U.S. Chamber of Commerce stands
ready to assist this process in any way possible.
STATEMENT SUBMITTED FOR THE RECORD BY THE NATIONAL ELECTRICAL

MANUFACTURERS ASSOCIATION
Mr. Chairman, thank you for holding this hearing. NEMA would like to comment
principally on the Electrical Safety Annex to the 1997 U.S.EU Mutual Recognition
Agreement, which was mentioned in the U.S. Chambers remarks.
10 Downstream users have expressed serious concerns about their responsibility burden under
the Chemicals directive proposal. See for instance AEA (formerly the American Electronics Asso-
ciation), EIA (Electronics Industries Alliance), ITI (Information Technology Industry Council),
NEMA (National Electronic Manufacturers Association) and SIA (Semiconductor Industry Asso-
ciation) Position Paper on EU Chemicals, April 2002.
55
Based in Rosslyn, Virginia, the National Electrical Manufacturers Association is
the largest trade association representing the interests of U.S. electrical industry
manufacturers, whose worldwide annual sales of electrical products exceed $120 bil-
lion. Our more than 400 member companies manufacture products used in the gen-
eration, transmission, distribution, control, and use of electricity. These products, by
and large unregulated, are used in utility, industrial, commercial, institutional and
residential installations. The Associations Medical Products Division represents
manufacturers of medical diagnostic imaging equipment including MRI, CT, x-ray,
ultrasound, and nuclear products.
In NEMAs view, the use of government-to-government MRAs should be limited
and considered only as an alternative for conformity assessment needs when appli-
cable to federally regulated products such as medical devices. MRAs are not the an-
swer to conformity assessment needs in non-regulated areas such as for most elec-
trical equipment; if anything, they serve to encourage the creation of unnecessary
product-related regulation. We strongly objected to the inclusion of the Electrical
Safety Annex in the U.S.EU MRA, and are pleased that Brussels has now moved
to suspend it. We are also pleased that the U.S. has either excluded electrical prod-
ucts from its subsequently negotiated MRAs, or refused to sign on to any such ac-
cords that effect our unregulated productsmost recently in the case of the U.S.-
Singapore Free Trade Agreement.
Further, during the impasse over the Annex, we have supported OSHA in its in-
sistence on retaining its authority over Nationally-Recognized Testing Laboratory
(NRTL) accreditation. Particularly with the granting of status to a German Con-
formity Assessment Body (CAB) in 2001, OSHA has shown that the process has in-
tegrity, and European applicants will be given the same consideration as their U.S.
counterparts.
NEMA applauds the Bush Administration and the European Union for their 2002
Guidelines Agreement on Regulatory Cooperation and Transparency. We ask that
pilot projects adopted for implementation of the Guidelines include the current EU
regulatory initiatives relating to Chemicals, Energy-using-Products (EuP) and the
Restriction of Hazardous Substances (ROHS)but, for the reasons elaborated above,
we do not think that electrical safety would be appropriate. In any event, we strong-
ly agree with the U.S. Chambers call for meaningful U.S.EU regulatory dialogue.
Thank you for your consideration of these remarks.
STATEMENT SUBMITTED FOR THE RECORD BY 3M CORPORATION

[The statement submitted by 3M exceeded the committees policies on the length
of prepared statements submitted for the record. A copy of the statement will be
maintained in the committees permanent records.]

Senate Hearing, 108TH Congress - U.s.-Eu Cooperation On Regulatory Affairs

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S. HRG.

U.S.EU COOPERATION ON REGULATORY AFFAIRS

SUBCOMMITTEE ON EUROPEAN AFFAIRS

COMMITTEE ON FOREIGN RELATIONS

OCTOBER 16, 2003

Printed for the use of the Committee on Foreign Relations

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate

U.S. GOVERNMENT PRINTING OFFICE

For sale by the Superintendent of Documents, U.S. Government Printing Office

KENNETH A. MYERS, JR., Staff Director

SUBCOMMITTEE ON EUROPEAN AFFAIRS

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Statement Submitted for the Record by the American Chamber of Commerce

THURSDAY, OCTOBER 16, 2003

STATEMENT OF CHARLES RIES, PRINCIPAL DEPUTY ASSIST-

Mr. Chairman, Im pleased to report that the U.S. Government

For its part, the European Commission presently is considering

A colleague of mine likes to say about the transatlantic partner-

PREPARED STATEMENT OF CHARLES P. RIES

working together is to eliminate this anywhere from 5 to 15 per-

ment here in the near future is information and communication

The significance of U.S.EU regulatory cooperation should be viewed against the

I believe it is vital that we embrace the U.S.EU economic relationship as one

ensure that we avert a repeat of the General Electric-Honeywell

Please understand that your testimony, full testimony if you

allows us to foresee problems, to reach agreement on their nature

Commissions different directorates general on the basis of the

STATEMENT OF HON. STUART EIZENSTAT, CO-CHAIR, EURO-

ican Business Council, my testimony nevertheless represents my

now in getting a convergence between European IAS accounting

Ambassador EIZENSTAT. Likewise, the Fly America requirement

The prospect of having different outcomes in an integrated market

PREPARED STATEMENT OF STUART E. EIZENSTAT

STATEMENT OF GARY LITMAN, VICE PRESIDENT EUROPE AND

Mr. LITMAN. Thank you. I would like to echo in my remarks most

Each model reflects the democratic choice of the policies on the

much alike agreements on standards for emissions, and the Com-

PREPARED STATEMENT OF GARY LITMAN

As we mentioned in our previous testimony before this subcommittee, June 24,

latory Cooperation, June 2003.

as to what may happen might well be useful, and we would think

liament is going to have to decide whether to try to improve it by

ously are very important. I know Secretary Snow personally well,

Ambassador EIZENSTAT. Those cases were merger cases, whereas

STATEMENT SUBMITTED BY THE AMERICAN CHAMBER OF COMMERCE TO THE

Effective cooperation between America and Europe on regulatory affairs is crucial

1 COM (2002) 704.

2 COM (2002) 276.

STATEMENT SUBMITTED BY THE CHAMBER OF COMMERCE

COMMENTS ON THE EU COMMISSION CONSULTATION DOCUMENT CONCERNING THE REG-

6 According to a study conducted for the EU Commission Business Impact Assessment of EU

STATEMENT SUBMITTED FOR THE RECORD BY THE NATIONAL ELECTRICAL

STATEMENT SUBMITTED FOR THE RECORD BY 3M CORPORATION

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